Monday, 13 August 2012

Unspecified Policies

Over the history of mankind, whenever politician wanted to speak in presence of the public, their words spoke of broad generalizations on the subjects they were to address and accusations towards their political opponents. Over the centuries this kind of talking was (and is) the norm of political conversation. However, since the beginning of the 20th century, and due to the increased exposure to information mankind has obtained since then, people have started to catch up with them and demand specific answers to specific problems. Unfortunately, politicians (and policymakers as well) are yet to live up to these standards. 

There are only three possible explanations about this phenomenon: 
1. They think that by dizzying their audience with excessive verbiage will make the latter think that they know their stuff
2. They really don't have any idea about a subject and the only way not to look stupid would be to speak in broad generalizations (which would be fine as long as they only did it on a few subjects. Being excessively general means that they either No.1 or No.3 is true or hmm they have no idea about any subject at all!)
3. If they give a specific solution to a specific problem people will expect them to enforce what they propose.

Studies have shown that people respond better to politicians and policymakers who propose specific solutions to specific problems. From my point of view, being specific help people understand how the policy will affect them and even improve it by direct communication with the policymaker. This helps avoid the three I's as stated in Poor Economics: Ideology, Ignorance, Inertia. Specific policies lead to more votes for politicians and more credibility for policymakers.

It is thus not strange that Draghi-type statements ("the ECB will do everything to save the euro") are not very popular. "Do everything" does not mean anything at all. What is everything? Does it mean stand still and wait as it all breaks down? Does it mean financial aid to banks? Does it mean new plans for a Greek haircut? It could mean anything. Or it most probably means that they have no idea of what to do and just hope to boost financial markets by statements. Guess what guys: Markets (and everything else in REAL LIFE) don't go up in words, only in action.

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