Tuesday, January 10, 2012

On Business and Policy (Or: Why Everyone Should Read Bill James)

Paul Krugman has a nice  blog post this morning asking a great question: "why does anyone believe that success in business qualified someone to make economic policy?"

The best purchase on this question is to go back to something that Bill James wrote a long time ago, which unfortunately I can't locate (the Abstracts were awesome, but not indexed, and I can never find my favorite bits when I want to cite them)...if I remember correctly, and it's been some time, I wound up doing an extended riff on this once back on r.s.bb, and to tell the truth I can't remember what was his original point and what I'm remembering from what I wrote, so my apologies overall. It's about what it means to "know baseball." The idea is that there are lots and lots and lots of ways to know baseball. There's technique, such as how to throw a cut fastball or the footwork for how to take a throw at third base from right field with a runner sliding in. There's also knowing what it's like in a major league locker room. Both of those count as "knowing baseball." But so does knowing what it's like to sit in the bleachers, or knowing about what the game was like in the 19th century or the 1950. It's also "knowing baseball" to be able to watch an 18 year old kid and project how he'll be a as major leaguer in five years -- and it's "knowing baseball" to sit at your computer and figure out how much a single is worth compared to reaching on a base on balls, or how much striking out hurts the team objectively compared to other types of outs. It's knowing baseball to know the business of a baseball franchise or of the industry as a whole. And it's even knowing baseball to get involved in your roto team, or even more fictionally to read baseball fiction, whether of the DeLillo and Malamud variety or, you know, what I like.

The point of all this is that there are all sort of different kinds of knowledge that go into "knowing" baseball, and no one is a real expert at all of them -- and that different kinds of knowledge are needed to answer different types of questions.

Which, among other things, is something that Mitt Romney certainly knows, since one of the main things that Bain and other similar consultants surely face is people telling them that they don't really know whatever business it is that they're swooping in to fix up. But of course the workers in those companies probably believe that the managers don't really "know" what's going on in the business (and you can spin this out over the different types of workers, depending on the company).

And to get back to Krugman's point, there's no particular reason to believe that knowing what Romney knows about how to turn around a poorly performing business has anything at all to do with knowing how to make an overall economy perform well. Just as it's really not important to know the footwork of how to turn a double play if you want to know whether Joe Morgan was better than Ryne Sandberg, or how it feels to be in the clubhouse isn't important (or at best is only one very small piece of the puzzle) if you want to know how signing Prince Fielder will affect franchise revenue over the life of the contract. I could see an argument that Romney's skills might be particularly important for managing the executive branch well, but for getting unemployment down and income up? What Romney claims to know just doesn't seem very relevant to that part of the job.

On the other hand, while a good grasp of economics might be pretty useful for a president, I suspect that it's not nearly as important as Krugman might argue.

What are important are political skills, especially the ones relevant to governing. Good politicians tend to make good policy -- in part because in a system of separated institutions sharing powers, a president has to fight hard to get anything done, and in part because it takes good political skills to build an economic team and get them to function well.


  1. Are you a SABR member? I believe there was an index of the Abstracts prepared by a SABR committee some years ago.

  2. A bit too meta.

    First, really smart business people are impressive. I have no doubt Rommey is really smart and impressive one on one. Far more so than professors or politicians. I've had opportunities to interact with a lot, and in general I'm more impressed with CEOs than politicians or professors (Clinton and Obama are two big exceptions. Very impressive in person).

    Second, people like Rommey know one thing. How to buy a company and load it up with debt.

    Third, what businessmen tend to be better at is decision making. That's the difference between businessmen and private equity managers.

    Fourth, you're right economics isn't important for politicians, but it is tremendously important for Presidents. Obama again is a case study here. He clearly never spent an ounce of his tremendous brainpower thinking about economics in the past 20 years, and we are a paying the price.

    Fifth, how important are basic political skills for Presidents? I've maintained for a few years that Obama's lack of political blocking and tackling is hurting him. But I'd like to see some studies on that. The end of Daley (piss on him in public, then when he comes to you to resign, give him a day to reconsider) seems very typical. You've got to use sacking your COS for some gain.

  3. These aren't indices, but you might find Rich Lederer's 12 part abstracts of the Abstracts series useful:


  4. Jonathan are you thinking about the "inside baseball" discussion? If so, it's in the introduction to the 1984 Abstract.

  5. Not sure, but I just went back and read it for the first time in a few years, and he sure could put words together.

    My guess is it's more something that I learned generally from that piece and from other comments James made over time.

  6. Back to expertise, two additional comments: 1) Many of the problems in DC do not arise from lack of knowledge, but rather lack of will, and 2) Even someone experienced in an area of private industry may not have the best perspective for public policy.

    To the first point, Congress doesn't need a business expert to tell them how to reduce the deficit; Congress knows what they need to do, they just don't want to do it. To the second point, when a CEO of a multinational considers Europe (for example), s/he probably thinks about the value of a weak US dollar to goosing profit, and specifically they may favor dumping PIIGS from the Euro if their company is not exposed to those countries. Could be good for the company, while not good for the US.

    More often than not, these experts are brought in for their brand equity and little else. Perhaps never was this so true as when Obama appointed Jeff Immelt to head his jobs panel.

    I'll tell ya, whatever good Immelt has done as CEO of GE over the past decade, you can take it to the bank that he has never overseen a jobs creating effort in that CEO role. That is, er, not his job.

  7. This is an absolutely profound point. The area where I run into it the most is when participating in any sort of discussion about childbearing or rearing as a childless person. At some point in said discussion, a parent will say "well, you don't know anything about this topic because you are not a parent".

    And it's wrong. Of course, there are things that parents intimately understand about parenting that others do not because they are not parents. But there are also plenty of things that you actually understand better if you are looking at the data from the outside, whether it is Judith Rich Harris' research on how peers shape outcomes more than parents, or the work of various feminists showing how parental gender-norming affects the performance of girls and boys, or the work of authors pushing back against breastfeeding activists on the pros and cons of breastfeeding.

    There's no such thing as total expertise in any broad field; there's only different perspectives that result from the particular swath of information that one can view from one's standpoint. And a lot of people miss the forest for the trees.


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