The Jihad Against ‘Uncertainty’ Continues
December 11, 2012 5 Comments
Last time it was Ritholtz, this time it’s Yglesias getting all hot and bothered by the fact that there exist financial actors who say uncertainty bothers them (without having consulted Matthew Yglesias first).
Seriously, what is going on?
I feel as though I’ve walked into the middle of an argument whose beginning I missed. As a result these (over)reactions just make me scratch my head. Yglesias even says he’s “angry” about this!
What actually angers me is the eternal recurrence of …
“Angers”? What “eternal” “recurrence”? For Pete’s sake! Chill out, man.
Once again all I can figure is that Yglesias – like Ritholtz – perceives a belief in ‘uncertainty’ to be a threat to…well, something that they really, really want. What, exactly? More Keynesian something-or-other? I tire of trying to decipher these things and Keynesians are really starting to bore me, so if you know the answer to what the heck it is they want to which belief-in-’uncertainty’ is a Big Threat That “Angers” Them, just put it in comments. In the meantime, let’s just note that another way to describe overreactions is protesting too much. Which methinks they doth.
Let’s try to look seriously at Yglesias’s argument that Other Financial Actors Should Not Be Allowed To Cite Uncertainty As A Factor In Their Decisionmaking For Some Reason. Consider for example this claim:
Look. Uncertainty is an intrinsic feature of reality. Business executives do not currently know what fiscal or regulatory policy will look like in 2017 and there is absolutely nothing that can be done to alter this fact. Executives in 1952 did not know what 1957 would look like and executives in 1992 did not know what 1997 would look like. [...] There’s no certainty about domestic public policy, there’s no certainty about foreign crises, there’s no certainty about technologic trends, there’s no certainty about consumer tastes, there’s no certainty about anything.
The problem with these claims is that they simply prove way, way too much. Look, let’s suppose you are a business owner in Putin’s Russia. Here’s a thing that could happen to you:
- Vladimir Putin decides he doesn’t like you, and so he takes your business, and puts you in jail.
There are other places – the United States, hopefully! – where that thing is far, far less likely to happen to you. In other words, you have a bit more…oh, let’s call it certainty that certain Economic Events are not likely to befall you. Here’s the (oh so challenging) thought-experiment for Yglesias and Ritholtz to try as homework assignments:
All other things equal, which economic environment would you prefer as a financial actor? Which would make you more conservative vs. which would make you more likely to be willing to take risk?
If Yglesias believes what he wrote, it shouldn’t matter. After all, ‘uncertainty is an intrinsic feature of reality’, and so, financial actors everywhere – at all times – are mentally pricing in possibilities such as The Putin Guy Takes All My Stuff And Throws Me In Jail. That, and all other idiosyncratic possibilities, is already equally priced in by everyone. Distinctions between certainty of this or that economic environment are unimportant and (seemingly) disallowed to even think about. So that’s why they shouldn’t complain about ‘uncertainty’.
But this is nonsense and surely even Yglesias, let alone Ritholtz, does not believe it. Are they really trying to deny the importance of stability and consistency – things like a rule of law, predictably-enforced by relatively corruption-free courts – to an economy? Really? Do we really have to rehash that lesson?
Because when you say things like ‘hey, shut up, everything is always uncertain!’, and blithely wave your hands at the entire concept, that’s what you’re making it seem like. I don’t even know what to say. I don’t want to have to go over such basic ground and I don’t think I should have to, so again, what I really want is for these guys to just say what’s really bothering them, what it is they really want.
If it’s: “I wanna be able to raise tax rates as much as I can and not think about the economic consequences and have no one argue with me”, just fricking say so. It wouldn’t make these posts these guys are writing any less dumb, but at least they’d stop being disingenuous ciphers.