Sunday, October 06, 2002

Swap "Emotional" for "Risk-Averse"-My fisking of a Guardian article, and the statement that "Blogs pay attention to facts and attention to detail. Liberalism tends to be more emotionally based" got this guy hot and bothered. It was a little over the top, but I think it's valid nonetheless if you consider that a lot of the core of the economic liberal is a tendency to dwell upon the low-probability outcome in economics. Most of us are risk-adverse in that we'll prefer a $100 in our pocket to a 50-50 shot at $200; the general theory is that losing a dollar is more painful than gaining a dollar and that we will tend to err on the side of sure things in order to maximize our well-being. You say, "wait, that sounds conservative, to not sign off on an iffy proposition." However, in economics, it's the liberals who prefer the big government they know to the free market they don't. They'd rather have a smaller government benefit rather than a iffy but larger expected benefit from a freer-flowing economy. For conservatives, this means explaining the benefits of a free market economy and that the added income they are likely to get from a lower-tax environment is significantly higher than the government goodies the liberals will promise with the tax money. Voters will be from Missouri-the conservative will have to show them the money before they get out of their risk-averse "conservatism." Also, people tend to overstate the importance of long-shot events; even if they know the odds, they will act like the odds of something bad happening are a lot higher. If there's a 1% chance that the stock market will have lose to inflation over a 30-year period, the risk-adverse person will tend to act like its 20%. "What will we do when we privatize Social Security and the stock market goes in the tank?" The same thing we'll do if we keep up the status quo-raise taxes and cut benefits. Many environmental policy fights are cropping up from the parts-per-billion low-impact effects of some pollutants, where the response to stop them outweighs the risk. Democrats tend to be fearful of the market and its creative destruction, not knowing if they might have their business or their job destroyed in the process. They also miss the vast potential for wealth-creation that a free market enables. This is a rational fear if coupled with a lack of knowledge. Some of the fear is irrational, but a lot of it is standard risk-aversion coupled with a lack of knowledge of how free markets work. I can speak from experience, as I became more conservative as I went to business school, not from some sort of Stockholm Syndrome but from understanding how taxes and regulations slow down the economy. I stopped worrying and learned to love the free market. With a little reeducation, other liberals can too.

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