Platt Perspective on Business and Technology

Open markets, captive markets and the assumptions of supply and demand dynamics 8

Posted in macroeconomics by Timothy Platt on January 9, 2016

This is the eighth installment to a brief series on underlying assumptions as they arise and play out in economic systems, and in production and marketplace systems (see Macroeconomics and Business 2, postings 230 and loosely following for Parts 1-7.)

I have, up to here, primarily been discussing economic theory per se, and how business process friction and economic friction shape overall economies in practice. I have been very selectively pursuing very small pieces of an enormous puzzle in that, and freely acknowledge that a fuller and more systematic coverage of that overall topic would dwarf virtually any other line of discussion that I have offered in any of my other series to date in this blog, for scale. And my goal in selecting out the details that I have focused on in this, has been to address a few issues that connect very directly into business and marketplace experience and with this installment as a narrative goal.

I stated at the end of Part 7 that I would address:

• How politicians market economic theories and economics-based agendas when they campaign for office, and how that translates into legislation and enacted law, and into marketplace and economic realities. And I will discuss this in regulatory and legislative terms. And that will bring me back to the first installment to this series, and its line of discussion.

But I have to at least begin that by acknowledging as a starting point that politicians who invoke economic reasoning as justification for their plans and intentions rarely if ever actually ground what they say and what they would seek to do fiscally, in solidly empirically grounded, analytically reasoned economic principles of any sort – and even when they market themselves as candidates for political office under the rubric of following specific economic approaches and as staunch adherents of those specific approaches and their attendant explanatory theories. To take that out of the abstract with a specific example that has been valid in the United States at least since the presidential administration of Ronald Reagan, Republican Party political candidates and spokespersons and certainly the more “ultra-conservative” of their ranks, love to invoke economic justifications for their policies and particularly supply side economic model justifications. But they for the most part, do so more as a matter of applying a patina of economics-based justifications, to more competitively ideologically based political decisions that they have already reached, and for political platform decisions they have already made, than they do from dispassionate adherence to any particular economic model per se. If a demand side label with its corresponding cosmetic coverage would better serve their purpose in justifying their political agendas they would cry out the greater glory of that approach instead.

Yes, this sounds and is cynical, even as it is accurate as a basis for understanding political economics per se. Political parties and their standard bearers are essentially always more concerned about successfully competing against other parties and their politicians, than they are about adhering to any given economic theory that would arise a priori to and independently of their party and their campaign platforms, and that might come to disagree with them. Politicians who diverge from this approach and who come to disagree with the basic tenor of their political party and its conception of ideological purity as a result, generally find themselves outsiders in their party, or leaving it.

And with this, I add one more fundamental source of economic friction, to the sources and types of friction that I have been discussing up to here:

• Friction that arises when politicians and elected government officials make decisions and enact and enforce laws and regulatory processes that are perhaps framed in economic, or at least economic-sounding terms, but that are in fact more ideologically based, and even as they have profound economic impact and even as an intended primary goal.

I will simply refer to this as politically grounded economic friction, and note that it can and does impact on economies at all levels, from that of within-business microeconomics, to that of overall national and international macroeconomic systems.

I have begun this discussion with a more current events example, but note that the phenomena that I write of here cross political and national boundaries, and timeframes. And I will continue it in more historical terms, to both expand my range of available working examples that I can draw from here, and to more fully develop them, and in their longer-term contexts.

Meanwhile, you can find this and related postings at Macroeconomics and Business and its Page 2 continuation.


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