2013: Uncertainty the Destroyer

Kevin D. Williamson of NRO looks back at “A Year of Fear:”

Robert Higgs, economic historian and author of the indispensable Crisis and Leviathan, describes a condition he calls “regime uncertainty,” under which the possibility of significant changes in the status of property rights makes investment decisions difficult or impossible. This is partly related to uncertainty regarding policy issues such as taxes and regulations, but it is a wider phenomenon, one that is partly cultural. Higgs writes: “Regime uncertainty pertains to more than the government’s laws, regulations, and administrative decisions. For one thing, as the saying goes, ‘personnel is policy.’ Two administrations may administer or enforce identical statutes and regulations quite differently. A business-hostile administration such as Franklin D. Roosevelt’s or Barack Obama’s will provoke more apprehension among investors than a business-friendlier administration such as Dwight D. Eisenhower’s or Ronald Reagan’s, even if the underlying ‘rules of the game’ are identical on paper. Similar differences between judiciaries create uncertainties about how the courts will rule on contested laws and government actions.”

The Obama administration has achieved a special distinction here: Investors are faced with considerable uncertainty vis-à-vis how it might interpret rules as compared with the Bush or Clinton administrations — and also about how it might interpret rules as compared with the Obama administration the day before yesterday. Now you see a mandate, now you don’t. And as bad as it is in 2013, the seething hostility of Elizabeth Warren is ascendant on the left, a fact that offers very little encouragement to entrepreneurs and investors considering illiquid, long-term positions — things like factories, stores, and buildings, as opposed to easily liquidated investments in financial instruments. Many on the left complain about the “financialization” of the U.S. economy, while unwittingly helping to encourage that very phenomenon. Given a choice between dividing up his investments between a couple of hedge funds and financial firms or locking it up for ten years in an assembly line in Indiana, a sane man will consider the question of uncertainty and predictability. And under current conditions, the assembly line is a risky bet.

Perhaps 2014 will be the year in which we learn the value of predictability. Who can say?


New Yorkers in particular are about to learn that lesson — to the extent they learn it all — good and hard, caught between the double-whammy of the far left socialist president they support, and their far left socialist mayor, who just took office. Or to put it another way:

“We’d All Actually Like To Be Proved Wrong On This,” Moe Lane adds. “It’s just that we’re not expecting to be.” But then, as one contributor at Ricochet notes today, “The beauty of pessimism is that you are always happy. If you were right, you can be happy because you were right. If you were wrong, you can be happy because you were wrong.”

That seems like excellent advice for at least the next three years.


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