5 Reasons Alan Blinder is Wrong About A Businessman in The White House

Posted by Jeff Carter
on October 2nd, 2012

Are businesspeople more or less successful in the White House? I don’t think there is a correct answer to that question. Alan Blinder does. He points out that both Bush’s and Herbert Hoover were businessman and performed poorly in the White House. He also injects the “fairness” argument into what makes a good President.

He is wrong on both counts.

1. Romney is a very different kind of businessman than either of Blinder’s examples. Romney was a Private Equity investor who had to listen to the market. His investments success or failure came from listening to customers and responding correctly. He had to work with the companies he invested in, not make or dictate decisions for them. The examples Blinder listed all came from businesses (mining and oil) that run a little better when somewhat centrally planned. Central planning is not a hallmark of a good private equity investor. The best ones are very collaborative.

2. Once you put the notion of “fairness” onto the table, value judgements are made. Is it fair that I was born into a white middle class neighborhood? Is it fair that someone else was born and went to a tony private boarding school when I had to toil at a public school? What’s fair? Is it fair that one company is able to charge $3.49 for a crispy chicken sandwich when another charges $$2.45? Everyone has a different perception of fairness. That’s why markets exist.

Blinder says,

Rather than worshiping efficiency, some notion of “fairness” is typically paramount in government. One of the key success criteria in politics may be public perceptions of fairness, for perceptions and realities don’t always line up.

That’s because fairness is a market. Not everyone aligns themselves in lockstep. We all have different preferences and taste. Government works best when it sticks to its knitting of broad goals everyone can attain and let’s the market, it’s constituents, figure out the best way to attain them.

The Declaration of Independence is a perfect example. “all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness”

That’s Adam Smith at his finest right there.

3. Blinder states that President’s don’t focus on the bottom line, when in fact they do. His example says Nixon would have been better than Lincoln if bottom lines were the standard. It’s wrong, and sloppy analysis. Lincoln freed the slaves and created a new pool of free human beings that were able to flourish and prosper in the US if they chose to take advantage of it. That came at a tremendous cost of human life, and money. But I doubt anyone today could total up the costs versus opportunity costs and say the Civil War wasn’t worth it.

4. Blinder’s judgement that Obama is more empathetic than Romney is based on his own judgement. It’s not a market based judgement and frankly, measuring empathy is filled with so many individual biases it’s not possible. Romney certainly is much more charitable in time and money than Obama is based on figures that we know. How is Romney not more empathetic? Of course, that’s my opinion-and it only counts for me not the rest of the country or government.

5. Blinder says corporate CEO’s aren’t patient. Maybe they are teaching the wrong things at Princeton, but a lot of CEO’s I know and watch are extremely patient. Jeff Bezos of Amazon ($AMZN) comes to mind. If there was any evidence of an impatient President, just go through the entire history of the Obamacare bill. That’s a President that wasn’t patient, but dictatorial. He stopped at nothing to pay off people for votes and cram a severely unpopular program through and burden the American public with it.

The characteristics I see in both men are these:

Obama is autocratic and fond of dictating. Central planning is his hallmark. Romney is collaborative and listens to the market.

Obama is unyielding and doesn’t go with the flow. Romney is like lava and flows where the market tells him to go.

Obama relies on a pool of the few to make decisions. Romney is Coasian in this thought process.

Obama acts like a prince (spending $1.4 billion vs the English Royal Family $60M). Romney doesn’t spend other people’s money on himself. He is a miser, and donates millions to charity.

They are hugely different, and election of one or the other will have gigantic differences in the way we live our daily lives. Neither is perfect. But Romney is better than Obama when it comes to original American ideals.

I prefer to live in a country that prizes individualized market based thinking. It seems like Obama supporters all want to tell me, and regulate how I should live. That’s really what this election is about.

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