Politics and Economics

Politics & Economics: Two Worlds Collide

Most of us experience the world through individual events. For example, the stock market declines, and we react, or a war breaks out, and we react, or AI happens, and we react.

This week, it feels to me as if the entire world is in react mode. The post-US election fallout dominated many of this week's reactions, but AI also played a role. Reactive thinking is generally poor thinking. Sometimes it is motivated by emotion, sometimes by ideology, and sometimes by instinct. It rarely stands the test of time.

Whether we focus on the DOGE efforts to execute on its mission to make government more efficient, or Trump's declaration that he wants the US to own Gaza, or OpenAI's launch of o3-mini-high, almost nobody is standing back, taking a breath, and thinking.

Politics is where reaction lives. In other words, we react in that part of our brains where opinions and emotion live. Politics is not science and is not logical. It is always opinion-based. It can be formed due to deeper thinking, but it rarely is.

So how can we pause and think more deeply? How can we put short-term events into a context that enables us to form views that are born from frameworks we spent time evolving?

Elon Musk's DOGE events are a huge test case. Many of my friends (maybe you) are appalled by DOGE, especially the media focus on USAID.

The accusation that has gathered popularity is that DOGE is an out-of-control group, with zero authority, ransacking good departments, and breaking the Constitution. I think all of this is reactive political thinking.

DOGE clearly is a government department. It has the authority of the White House. Its stated goal of reducing inefficiency in government certainly encompasses discovering and stopping "bad" spending. It carries the authority of the elected President. It really does not matter that Musk is not himself elected. His role is clearly democratic.

So the real issue becomes whether USAID is misusing taxpayer cash, which it clearly is. Is the President acting constitutionally? And so is Musk acting - under his control - constitutionally? I don't know. But likely, until the law says otherwise or Congress stops them, the answer is - probably.

It is clearly OK to not like it. But also hard to be against government savings and the firing of bureaucrats without arguing for something. In the case of USAID, the only substantive argument against Trump and Musk seems highly reactive and equally shallow. And very emotional.

Why is this week's title Politics and Economics: Two Worlds Collide?

It is because I think that the world exists as a kind of layer cake. Most of our life is founded on economics. High growth, increased productivity, and open trade lead to wealth. Wealth generally supports stable life. And stable life results in happy citizens with great lifestyles. Bad economics (slow growth or recession) leads to constraints, which leads to anxiety, which leads to conflict.

Expensive government and bad economics are the worst of all combinations. This combination usually leads to conflict. Hence, the two worlds collide part of the title.

Any attempt to reduce the cost of government leads to resistance by those impacted. That includes those who feed from inefficient government, including various NGOs and employees. Many are good people just making a living. Their reaction is similar to taking a teenager's allowance away. Not likely to result in a healthy dialogue.

We have to analyze and not simply react. Is government inefficient, and can it be improved? It is pretty hard to say no to that.

The second question is whether those impacted should hold sway over the general imperative. I think the answer has to be no. Of course, humanism matters, and being kind through change is a bonus. But not at the expense of stopping the change.

Economics → Politics → Civil Society → Stability seems a clear way of thinking about the cascading impact of everything.

As such, innovation leading to better economics is the basis for all progress. Resources have to exist before they can be enjoyed.

I also think that cost-saving that doesn't have a correlated agenda for investment, growth, and modernization is unlikely to create a healthy society. The proposed sovereign wealth fund and ownership in high-growth assets would be a decent start there.

At the bottom, then, I am in favor of DOGE. That said, if I had a voice, I would want it to go after some of the larger budget items (it probably will), and I would want it to have a modernizing agenda alongside its cost-saving agenda. Despite its limitations, DOGE is overall a good.

I have emotional reactions also. I think we should try really hard to rise above them.

AI has had another decade in a week. Please go and try OpenAI's o3-mini-high model and be amazed by its reasoning abilities.