God save us from Practical Men

Progressive Conservative Leader John Tory is taking an old-fashioned, ideological approach to spurring Ontario's economic growth by promising to cut taxes, Premier Dalton McGuinty said Saturday...

McGuinty trumpeted his own pledge of $1.15 billion over the next year in direct grants to corporations that promise to create jobs...

"You can't just do as Mr. Tory is proposing, which is old-fashioned, kind of a Conservative ideological approach to helping the economy, which is to simply cut taxes and sit on your hands," he said.

"You can't just cut taxes and hope everything's going to work itself out. You've got to bring some money to the table." -- CP, Sept. 22

Every now and then I have to remind myself of something that ought to be obvious but seems incomprehensible to me all the same: namely, that a good many people who go into politics -- most people, in fact -- don’t give a fig about policy....

It isn’t just that they don’t know the first thing about it, and usually get it wrong. It’s that they couldn’t care less. It doesn’t even occur to them that they should care. They do not inhabit a world in which policy matters. To them, politics is strictly about gangs -- only instead of Crips and Bloods, they’re called Liberals and Conservatives.

That’s your ordinary politician. But of these there is a special breed, who glories in the title of the Practical Man. The Practical Man is not just ignorant of policy. He is hostile to it, at least so far as this involves the careful and systematic study of a subject, the fruits of which he is inclined to dismiss as “ideology.” His ideology is to have no ideology, on which point he is as precisely dogmatic as any pharisee.

John Tory says he would have no room left under the Progressive Conservative's fiscal plan to roll back Liberal corporate tax increases after he scraps the Ontario health tax...

[T]he PCs would continue to follow Liberal economic policy ... in using government money to invest in Ontario business. The auto sector for example, has been a huge recipient of government subsidies.

"I have said repeatedly I would want to have in the toolbox of an Ontario premier, direct investment or direct incentive," he said...

"I'm not governed by ideology on it, I just say look what is the payback... if the government writes a cheque." -- Financial Post, Sept. 27

This will come as a surprise to those who think of policy and politics as being somehow related. But they are not -- or if they are related, it is in active opposition to each other. I can say that with some confidence, at least, with regard to economics.

All of economics is devoted to the proposition that there is no such thing as a free lunch. All of politics is devoted to the opposite conviction. All economics teaches that you can’t get something for nothing. All politics supposes that you can -- or that you can at least persuade other people that you can. Economics is about scarcity, universal and inescapable. Politics is about limitless plenty.

Consider that 98% of all bad policy amounts to nothing more than ignoring opportunity costs: the simple axiom that the cost of something is measured not just by the actual sum of money used to produce it, but what the same funds might have purchased, diverted to another end -- the profits forgone, the jobs not created, because that money was spent in one way and not another.

This has nothing to with that mythical media beast, “conservative economics.” It isn’t conservative or liberal. It isn’t even economics, come right down to it. It’s physics. More in one place means less in another.

Industry Minister Jim Prentice, unlike his free-market-focused predecessor, sees himself as a pragmatist when it comes to determining government's role in the economy.

And while his title is Industry Minister, he describes his job as a balancing act between promoting the interests of businesses and consumers...

"I'm a pragmatic person... I don't see a conflict there, I just think it is an essential balancing of responsibilities that the Minister of Industry has."...

One sector, however, that has already received his attention is Canada's giant, but struggling, auto industry...” -- CanWest News Service, Sept. 20

And yet here we have the Premier of Ontario, Dalton McGuinty, proclaiming to all the world his unshakeable belief that nothing gets done unless the government makes it happen, by “bringing money to the table.” Mr. McGuinty appears to believe not only that this fantastic certainty is to be distinguished from his opponent’s “ideological” preference for cutting taxes, but that his own approach -- handouts to corporations -- represents the very cutting edge of sophisticated thinking.

And, lest the premier’s insult be left to stand, here is the leader of the Opposition, John Tory, defending himself against the charge of wanting to cut taxes. Practical Man that he is, he is “not governed by ideology,” and as such would have no objection if “the government writes a cheque.”

Mr. McGuinty has been premier for four years, leader of his party for 11, a member of the provincial parliament for 17. Mr. Tory has been in politics, off and on, for the better part of 30 years. Yet neither man’s thinking about the economy seems to have advanced beyond this crude confusion of the particular interest with the general, the notion that “what is good for General Motors is good for the country.” In the economist David Henderson’s wonderfully accurate term, it is “pre-economic.”

What both men know, or think they know, is that if they give the auto industry a lot of money, jobs will be created in the auto industry. Actually they don’t know even that. They have no way of knowing whether the auto makers would have hired those workers anyway. And they certainly do not know how many jobs would have been created if the same money had been left in the hands of consumers and investors -- or what is the same thing, how many jobs were destroyed in other sectors of the economy, not only by the taxes that had to be paid directly to underwrite those government cheques, but by the investment those cheques diverted into the auto sector.

All they know is that the jobs they have “created” are in plain sight, whereas the jobs they have destroyed are hidden from view, scattered across the economy, impossible to identify -- and thus safely consigned to the world of “ideology.” That is what they imagine to be the objection to industrial handouts: not the opportunity-cost objection that the whole thing is at best a zero-sum game, not the considered analysis of economists who have made their life’s work studying the subject, but a sort of petty phobia, a fetish of some kind. Whereas their own divine obsession with the auto industry is the height of pragmatism.

Nor is this a failing only of provincial politicians. What are we to make of Jim Prentice, and his bizarre theory that the consumer and producer interests require “balancing”? What can he possibly mean by this? If there is a more basic axiom of economics than opportunity costs, it is that the purpose of production -- the whole point of the exercise -- is consumption. There is no “balancing” to be done: We either make things people want, at prices they are willing to pay, or we don’t.

If Mr. Prentice means we should make things people don’t want, at prices they aren’t willing to pay, he should say so: indeed, that is more or less the point of industrial subsidies. Only do not dress up this preposterous nonsense as “practicality.”