Wednesday, January 11, 2012

Does Micro Experience in Business Translate into Macro Competance in Economic Policy?

On the heels of yesterday's primary in New Hampshire, I want to explore the central claim in Mitt Romney's rhetoric.  His argument is "I had a career in the business world, therefore I am better suited to fix the economy than the President who has not built a business career."  I am not interested in the particulars of Romney's career -- did Bain Capital build businesses and create jobs or did they raid companies and make their money laying off workers and selling off the pieces -- nor do I want to contrast the particular policy proposals.  I am more interested in the argument by authority that Romney is putting forward -- I am an authority because of my experience.  We heard similar arguments during Clinton's run in which he was attacked as incapable of being a competent commander-in-chief because he lacked military experience -- again, having never climbed a tree, he is not someone who can be trusted with questions about forest management.

Earl Weaver is a hall of fame manager, but was a lousy ballplayer.  His star outfielder Frank Robinson is a hall of fame player, but did not enjoy comparable success as a manager.  We cannot draw a straight line between success at the lower dirt-under-the fingernails level and then at the higher strategic level.  But, at least Earl Weaver did play the game.  On the other hand, there are businesses that are destroyed when they replace someone who came up through the ranks and understands how things run and replace him with a newly minted M.B.A. who has no experience or care with the core product of the company.  In the case of macroeconomic policy, does experience in the trenches teach you anything that cannot be learned otherwise?  How much of an advantage -- if any -- does one get in determining successful macroeconomic policy from being acquainted through experience with the workings of particular businesses?

Further, what counts as experience here?  Why does being in the business count as experience, but being a consumer, not?  Does our notion of being "in business" itself have a bias towards owners and away from the other stakeholders?