Capital Offenses

MSN Slate's Chris  Suellentrop, because he doesn't know what capital is, wins the economic poseur of the month award.  You have to be trying to sound smart, you have to be smug, and you have to be trying to make someone else look bad.  Those are the rules. It's a tough job, but Suellentrop is up to the task.  And then some.

He's criticizing Bush for the latter's use of the term "political capital," particularly because Bush talks about "spending" political capital. Bush is an easy target on these issues (and  I do not  support Bush's economic policies.) But the condescending journalist, precisely because he feigns an expertise he does not have, comes off looking much worse than the Texan. Suellentrop writes:

We've become accustomed to talking about all kinds of abstract capital in recent years—human capital, social capital, intellectual capital—but Bush's definition of political capital makes the metaphor particularly inapt. For one, you don't spend capital. You invest it.

Oh. So we've become accustomed to talking about these kinds of capital, have we?  Hmmm. Do "we" understand  what "we" have been talking about? Um, nope. Not at all. In Econ 1A-- the introductory class that has the texbook with big glossy pictures in it--the average college freshman learns that "capital" is defined as a good or goods used to produce other goods.  A  machine is capital.  A hammer is capital.  Let's revisit Suellentrop's critique:

For one, you don't spend capital. You invest it.

Oh, really. Do you invest a hammer? Nope. You do not invest capital, you purchase capital (or invest IN capital).  The colloquial usage in financial circles sometimes differs from the economist's usage, but Suellentrop is clearly using terms from economics here--and pretending to understand them. He uses the term human capital, for example. This is education or skill that  individuals acquire that raises their future productivity. Obviously, you do not "invest" education. You purchase it or invest time and effort to acquire it.

Is  political capital a meaningful concept?  Most economists would judge the usefulness of the term by whether you could write down an interesting model using the concept and generate interesting predictions.  I haven't seen such models, but they might exist. The journalist, for his part, writes:

Edward J. López, an economist at the University of North Texas, delineated two types of political capital in a 2002 paper for the Review of Austrian Economics: "reputational" capital, a politician's "standing with voters and other unorganized interests," and "representative" capital, which includes the powers that stem from a politician's office. But Bush doesn't mean anything that rigorous. In fact, he'd probably scoff at the idea. He just uses it as a substitute for the goodwill that an election gives an executive with the legislature.

Though the journalist belittles the notion, it is actually quite natural to think of goodwill as capital. You have to invest time and resources to get it. Once you have it, it raises your productivity and allows you to accomplish more than you would have without it.  And like most forms of capital, it depreciates. It's true, you do not exactly spend capital. But  there is an opportunity cost when you use capital:  When you use it to produce one thing, you cannot simultaneously use it to produce something else. In this sense you can waste or squander your capital (or your goodwill). You can use it in unproductive ways. 

But truly, the funniest line in the article is the journalist's somber pronouncement that the President's political capital metaphor isn't "rigorous." Yep. True enough. But this comes from someone who doesn't even understand the most basic of basic concepts relating to the topic about which he has written a column. If the journalist himself ever had a rigorous thought in his own head, it would die of loneliness.

Journalist, inform thyself.

-P.S.Babcock

Comments

[Chris Silvey]

"...and I do not support Bush's economic policies."

This is sort of a cop-out; I would be suspicious of anyone who supports Bush's economics policies (as a whole). But surely there are parts you agree with and parts you do not. It would be more informative to give specifics.

After re-reading the above I noticed that it is inane nitpicking...please forgive me...finals are in a week and I am rather irritable at the moment.

[Philip Babcock]

Understood, Chris. I'll be more specific. I think Bush has lacked fiscal discipline. That's it, in a nutshell. Cut taxes, increase spending, and let future generations worry about the rest. Doubtless, there have been positive apsects, as well. Double taxation of dividends, for example, never made much sense. But it seems to me that the thrust of his economic policy involves the shifting of burdens to future generations. Maybe he'll surprise me this term. I hope so.

I mentioned my discomfort with the President's economic policies in the post just to telegraph to readers that my purpose was not to defend Bush. There is ample economic illiteracy on both sides of the aisle. My purpose in the post was only to show how those who pretend to be smart and sophisticated in the media are often so poorly uninformed that they have become comical in their intellectual pretensiousness. Heck, this guy writes a whole column and hasn't bothered to look up the economic definition of the term he's writing about. As is so often the case, journalistic smugness substitutes for basic knowledge.

Good luck on finals. Trust me: Next year, things will be a bit more fun.

[Kevin]

I voted for Bush, but I'm not a big fan of his economic policies either. I will second what Phil said about taxes and spending. I would also like to say that I don't think he's very good on anti-trust issues either. Has he prevented any mergers? And what happened to Microsoft being found guilty of whatever they were doing?

The only thing I like about the EU is that they stand up to mergers that the US won't.

That said, I don't think Bush is the unmitigated disaster that DeLong and Krugman make him out to be. I think he's about average: not great but not horrible either.

[Philip]

I agree, Kevin. Moreover, there's little evidence I could find that Kerry's policies would have been an improvement. A no-win situation, this election.

[Jenalyn udani]

pls