21 September 2010

Governments fail: delay and fiscal policy

A guest post from WEH:

Before one discusses how delay in government fiscal policy leads to government failure, one should look at nimble.

"Nimble" is basically the ability to innovate and change in short time spans. This phenomena of nimble is absent within a collective. Nimble is related to private property rights and mutual self interest.

Within the realm of political-economy it has been long known that governments fail due to delay in fiscal policy along with the the inability to be nimble regarding implementation. Does a monopoly organization (government) directed by politicians have quick organizational responsiveness and the ability to innovate and change? No. Governments are not nimble.

Nimble in fiscal policy will never exist. Fiscal policy is the reverse of nimble, that is "fumble." Government fiscal policy is an attempt to hit a moving economic target, a highly-dynamic moving economic target.

In the U.S. economy delay in fiscal policy implementation is directly associated with the form of government. Representative republic is a great form of government. However, the representatives of the republic must deliberate about government intervention in the form of fiscal policy.

However, the economy is changing while representatives debate. It's likely that economy has changed by the time that deliberation has settled on a fiscal policy intervention.

Hence, we see a stale intervention into an economy that has changed in composition, players, trends, etc. Further, the intervention is administered by a non-nimble bureaucratic management structure.

Bottom Line: Fiscal policy deployed in response to past economic circumstances may have zero or negative impact on the dynamic forces within the economy.

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