Public Understanding Necessary for Good Policies

While knowledge of how a modern fiat currency works might (should) lead to better government policy, we won't know or find out, as long as the public fails to understand such ideas.

A candidate for office is largely judged for her conforming judgements and conventional thinking.  She wins by showing a “sound mind,” and stays in office by acting in a conventional way.

I like Stephanie Kelton’s analogy.  An influential six foot person will advise people to walk stooped over if he believes the ceiling is a bare six feet high.  He has been walking with head bowed all his life. They will thank him for the advice, walk accordingly, and judge him a wise man.  But what if the ceiling is really eight feet high? What if the height of the ceiling has changed since the house was first built? For how long will people continue to stoop? Indefinitely?

This, I believe, is the essential problem we face in understanding financial policies (inflation, debt, trade, etc.) today.  It is just possible, I think very likely possible, that we live in a fiscal house with eight foot ceilings, while we still obey the limitations of an imaginary six foot limit. 

For example, take the ideas behind Modern Monetary Theory (MMT). It is clearly not a crazy fantasy, nor a far left idea (it has serious positives for those who wish to advance a conservative agenda).  As Kelton says, “It is first and foremost a description of how a modern fiat currency works.”  (The Deficit Myth)

As I understand it, it should be taken seriously, debated and tested by our elected leaders.  It is perhaps one of the most important intellectual questions the citizens of sovereign nations must consider in this decade.

It has responsible critics. Some of them, it seems to me, are exploring the same reality but starting from a different place. And, yes, as common sense would have it, reckless use of any tool, of any theory, needs to be opposed.

I’ll try my hand at explaining it in another blog. But for my purpose in this discussion I am using it as an example. Just as Copernicus did not persuade everyone he met on the street that the earth circles the sun, advocates of MMT face deeply held, felt and rooted, public notions about money, government spending and global trade.  And this matters.

Government leaders in a democracy can not get ahead of the conventional thinking of the electorate. Even if our leaders and candidates for office are visionary, they will not be able to create innovative policy options to meet the human needs of this century, if we, the general public, the voters, don’t expand our own thinking,

I meant to close the blog at this point. Brevity being a bewitching hobgoblin. But, may I add a word or two?

It is our own thinking that limits potentially better government performance. Our elected leaders can’t get too far out a head of us. Democracy is a limiting power, as much as an enabling force for change.

Lincoln in his second annual message to Congress:

The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty and we must rise with the occasion. As our case is new, we must think anew and act anew. We must disenthrall ourselves, and then we shall save our country.”

My favorite quotation of all time. Look up “disenthrall.” Enthrallment is mental slavery, the result of a spell cast by the minds of the past, or the enchanters of the present. Our country is at such a crisis as Lincoln faced. And we shall save our country only if we disenthrall ourselves.