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Of Public Interest
Volume 2, Number 17
November 2000
Whom Should We Credit for
Good Economic Performance?
by Richard E. Wagner
Any student exposed to the rudiments of logic comes quickly to learn of the
post hoc fallacy. The full version of this fallacy is "post hoc, ergo
propter hoc," which translates as "after this, therefore because of
this." The post hoc fallacy is easy to commit because it simply expresses
what we observe in the world around us. Post hoc reasons often seem to reflect
what appears to be "intuitively obvious."
For millennia people believed that darkness followed day because the sun
moved across the sky from east to west. This is the post hoc fallacy, only it
was not recognized to be a fallacy until the 16th century,
when the Polish astronomer Copernicus explained how the earth rotated on its
axis. To this day, however, we speak of the sun’s rising and setting, even
though we now recognize that the sun does no such thing.
Post hoc reasoning is a kind of "natural" logic. It fits directly
with what we observe. When people carry umbrellas in the morning, it seems often
to rain later in the day. When they leave home without umbrellas, it is mostly
dry during the day. In a pre-Copernican age, carrying umbrellas might have been
viewed as a kind of rain dance, a generally successful one at that: after
carrying umbrellas it rains; therefore, it rains because people carry umbrellas.
True, people don’t succumb to post hoc reasoning when it comes to gauging
the relation between umbrellas and rain. We see behind the direct observations
and understand the genuine relationship. To avoid the post hoc fallacy requires
a genuine understanding of the situation at hand. We have such an understanding
when it comes to umbrellas and rain, as well as when it comes to day being
followed by night.
One place where post hoc reasoning is rampant today is in the political
arena, particularly when it comes to the assignment of credit or blame to
political leaders for economic performance. Economic performance has been strong
throughout the years of the Clinton presidency. While President Clinton has been
understandably eager to claim credit for this performance, numerous observers
have readily granted that claim. To be sure, some of those observers would have
Clinton share the credit with Alan Greenspan, Chairman of the Federal Reserve.
The central idea in any case is that credit for economic performance belongs
to political leadership. In making this attribution of credit, the national
economy is treated as if it were a very large company, with the President being
the CEO. This may seem to be an intuitively obvious thing to do, but it is as
erroneous as the pre-Copernican claim that the sun rose in the east and set in
the west.
A CEO directs his company, and the results of that direction, for good or for
bad, rest upon him. No one, however, directs a national economy, and this makes
all the difference. The Communist vision was of the national economy as a giant,
nation-wide company. That vision failed utterly, bringing only misery and
poverty in its wake. One needs only to compare Western and Eastern Europe or
North and South Korea to see this. The Communist vision failed because a
national economy is vastly too complex for any person or office to manage. There
is a fundamental asymmetry in what politics can accomplish with respect to
economic performance. This asymmetry implicates politics much more fully in
economic failure than in economic success. It is possible politically to
severely damage or even destroy an economy. It is not possible politically to
create one. If creation were within the competence of politicians, the Soviet
Union would now be a dominant international player and not a relic of history.
The best thing that government can do for economic performance is to provide
a basic protection of people’s person and property. So long as government
provides a stable framework of law within which people can conduct their
economic activities, people will generate a robust economy on their own. Within
this stable legal framework, the people themselves will generate a robust
economy, as the history of the rise of the West illustrates strikingly.
Good performance is a natural feature of an economy when government maintains
a backdrop of stable rules of law. Politicians would deserve some modest credit
for good economic performance, just as would anyone who did their job well. The
assignment of credit is very different when it comes to bad performance. Bad
economic performance comes about only through bad political performance. The
history of the Communist lands is massive testimony to this point. So too is the
Great Depression in the United States. That cataclysm began with the federal
government’s inflationary policies of the 1920s, which fueled an unsustainable
economic boom, and was capped by the Federal Reserve’s severe monetary
contraction in the early 1930s.
It is quite reasonable to blame politicians for bad economic performance.
Credit for good performance, however, should be reserved for the people.
Dr. Richard E. Wagner is Public Interest Institute's Academic Advisory Board
Chairman
and Holbert L. Harris Professor of Economics at George Mason University.
Permission to
reprint or copy in whole or part is granted, provided a version of this
credit line is used: "Reprinted by permission from OF PUBLIC
INTEREST, a publication of Public Interest Institute."
The views expressed in this publication
are those of the author and not necessarily those of Public Interest Institute. They are brought to you in the interest of a
better-informed citizenry.
A Publication of:
Public Interest Institute at Iowa Wesleyan College
600 North Jackson Street
Mt. Pleasant, Iowa 52641-1328
Phone: 319-385-3462 Fax: 319-385-3799
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