Monday, May 26, 2014

Penalty Kicks and Economic Policy

There’s a link? There is a metaphorical one, according to Stephen Gordon (excerpt):

Action bias and the political economy of penalty kicks

Most penalty kicks result in a goal; this is why soccer players go to such comical lengths to draw a penalty…The usual strategy is to try and guess where the ball will be kicked and to jump in that direction. Surprisingly enough, the tactic of not jumping - that is, guessing that the ball will be kicked down the middle - is under-utilised.

An interesting study from a group of Israeli researchers (Bar-Eli et al, 2007) offers a plausible explanation: 'action bias'…

…Goaltenders believe it is less bad to follow the 'norm' (i.e., to jump) and fail than to not jump and fail. In other words, goaltender think that jumping and missing is less costly than not jumping and missing.

Which brings us to economic policy. Politicians are continually demanded to 'do something' about a kaleidoscopic array of grievances, and the norm in these cases is to promise to do something. As far as politicians and most voters are concerned, doing something is better than doing nothing - even when doing nothing is the correct response.

In many cases - possibly the majority of cases - doing nothing is the smart move….

…But doing nothing is almost always bad politics: it is invariably interpreted as a lack of concern, and this percieved [sic] indifference will be pounced upon by other political parties. A politician who promises to act polls better than one who promises to do nothing.

Goaltenders jump because jumping is expected of them: they fear to look silly by not jumping, even if not jumping is the smart move.

Politicians promise action because action is expected of them: they fear to look uncaring by not acting, even if inaction is the smart move.

Ever wonder why we seem to sprout new government agencies or institutions over the years, without ever losing any of the old ones? Now you know.

I’m reminded of the politician’s syllogism that I heard ages ago on Yes, Prime Minister:

  1. We must do something
  2. This is something
  3. Therefore, we must do this

This is the logical equivalent of:

  1. All cats have four legs
  2. My dog has four legs
  3. Therefore, my dog is a cat

I get reminded of this every time the government budget rolls around (both the official and “alternative” versions), at every election time, or when something bad or unexpected happens and the public demands the government “do something”.  While in some cases, doing “something” is absolutely warranted, sometimes doing nothing is the correct approach.

Next time you feel that economic policy has to be changed, when the economy looks like its doing badly, when some problem or other in society crops up that everyone says just has to be solved, just tell yourself, “my dog is a cat”, then reflect if change is really necessary.


  1. Karl Marx once said, "Democracy is the road to socialism."

    Isn't it funny that democratic Europe and US have more social welfare than Communist China/Vietnam/North Korea?

    We lives in a crazy world, where almost everyone I met thinks the government can solve every single problem and the government is to be blamed for everything. [depending on who they support]

    Quote from Red October - "I'm a politician which means I'm a cheater and a liar and when I'm not kissing babies I'm stealing their lollipops."

    Big government with more agencies means more opportunity to steal from the public.

    1. Ngan,

      I was at the Budget Consultation yesterday. The PM said MoF has received over 300 memorandums asking for changes in government allocation, from across the business and social spectrum. While some were asking for legislative changes, many were also asking for grants, tax breaks and the like. Taken singly, its hard to object to most of them, e.g. one fellow was pleading for temporary assistance for rubber small holders. But taken together, its not hard to see why governments tend to grow.