Tuesday, January 10, 2012

Nothing like

Wondering why success in running a business is supposed to mean success in running a country, Paul Krugman points out a fact:
For the fact is that running a business is nothing at all like making macro policy. The key point about macroeconomics is the pervasiveness of feedback loops due to the fact that workers are also consumers. No business sells a large fraction of its output to its own workers; even very small countries sell around two-thirds of their output to themselves, because that much is non-tradable services.

This makes a huge difference. A businessman can slash his workforce in half, produce about the same as before, and be considered a big success; an economy that does the same plunges into depression, and ends up not being able to sell its goods.

And that's even if you think Romney was a success. It's sort of like Rick Perry trying to parlay his success in Texas into the presidency. Even if you think he was successful, he can't reproduce it: luring business from other states just doesn't translate to the federal level.

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