Uncertain About Uncertainty

Today I read that Wisconsin lost 12,500 private sector jobs. Gov. Walker, who took credit for previous job gains, was quick to pawn the blame off on others.

Gov. Scott Walker, who last month credited his administration's business-friendly policies for big job gains in June, attributed the July job losses to turmoil in the national and international economy as well as to uncertainty created by the state's special recall elections.

Asked whether he should be held accountable for July's decline as long as he also wants credit for June's gain, Walker responded by describing what he called "incredible uncertainty both at the federal level - in terms of the debt ceiling and all the tension of that, and the negative impact that had on the economy - combined with July and August, when you saw the height of the recall commercials. And I think for a lot of employers we talked to, that created a high level of uncertainty, not knowing what was going to come next."

Uncertainty, uncertainty, uncertainty. I am sick of hearing about it. Even the secretary of DWD is parroting it: "The wild market fluctuations during the debt ceiling negotiations, the European debt crisis and other factors contributed to a great deal of uncertainty, which may very well have affected Wisconsin's job numbers given our state's ties to the national economy." Does Walker e-mail talking points to his appointees every morning? "Be sure to use the word 'uncertainty' as much as you can today. And blame unions wherever possible."

I thought that Friedrich Hayek, a favorite economist of conservatives, covered this in The Constitution of Liberty. Wasn't one of his book's themes "Of course there's uncertainty. That's the world in which we live in."? Isn't that one reason he argued for capitalism against a planned economy? You know, we cannot know the future and markets are better equipped to handle the vagaries of economic life than a lumbering government whose plans can topple like a house of cards if something unexpected happened.

After reading the article, I was reminded of "Why 'business needs certainty' is destructive" by Yves Smith. She describes the whole idea of business needing certainty in the form of the absence of regulation as "propaganda that needs to be laughed out of the room."

Commerce is all about making decisions and committing resources with the hope of earning profit when the managers cannot know the future. "Uncertainty" is used casually by the media, but when trying to confront the vagaries of what might happen, analysts distinguish risk from "uncertainty", which for them has a very specific meaning. "Risk" is what Donald Rumsfeld characterized as a known unknown. You can still estimate the range of likely outcomes and make a good stab at estimating probabilities within that range.

Uncertainty, by contrast, is unknown unknowns. It is the sort of risk you can't estimate in advance. So businesses also have to be good at adapting when Shit Happens.

So why aren't businesses investing or hiring? "Uncertainty" as far as regulations are concerned is not a major driver. Surveys show that the "uncertainty" bandied about in the press really translates into "the economy stinks, I'm not in a business that benefits from a bad economy, and I'm not going to take a chance when I have no idea when things might turn around."

If businesses needed certainty in order to hire and invest, then they'd never do it because there's isn't much certainty in life except death. (Corporations have figured out how to elude taxes.)

Other than giving a bullshit mantra, Walker also irritated me when he said, "In the first six months, the policies we put in place helped create certainty in the state." Certainty of what? That you can carry a concealed handgun? I want to see some proof that anything Walker did significantly helped the Wisconsin economy instead of factors over which he has no control. I guess I'm just cynical to think that recall elections aren't a big factor to most companies as opposed to, say, not having a lot of people who want or can afford to buy your product.