(I had written this out, but I was sitting on it, debating whether to soften it up, and I saw that Menzie Chinn made a post this morning that is, unfortunately, a perfect example of the problem. Our central bank treats success as failure, and our academic economists treat costs as benefits. So, I decided to post this. I promise I will get back to my housing series.)
I was listening to NPR this morning, and they were talking about the Keystone Pipeline. Politics is about imposing our factional collective will on others. So, the point of engaging in politics is to stubbornly refuse to acquiesce to reasonable opposition. That being the case, the way to win in politics isn't to engage in thoughtful dialog. If anyone disagrees with you to begin with, in the political realm, they will be engaging with you specifically to avoid that. So, you win by appealing to whatever misconceptions or biases they have already committed to, which happen to support your policy preference. I call this "Grubering" someone.
So, when I happen upon political dialog, what is striking to me is how often basic truths are avoided by everyone involved in the discussion.
And so it is with the Keystone XL Pipeline. Regarding the economics of it, there is really only one significant measure of value, and that is the consumer and producer surplus it will provide. On the margin, the consumer surplus will only come about indirectly and will be difficult to measure. But, by the conventions of modern finance and accounting, we tend to keep a precise record of producer surplus - profit. The economic profit the owner expects to reap from it is really the only measurable point of clarity here. This point appears to be stridently ignored by all involved. In a sane public debate, instead of arguing how many jobs it would create, we would ask the intended owner how much they were going to make on the pipeline, and the higher the number, the more support we should give it.
The jobs created by building and maintaining it and the materials and capital used will presumably be slightly more valuable as a result of this additional opportunity for their application. But mostly, on the whole, it will simply divert labor and capital from some similarly valued activities that are competing for our limited resources.
So, here's a test. Tell someone that you like the pipeline, but you would really love it if instead of creating all these jobs, the owner simply had a state of the art machine that would quickly lay down the pipeline with little cost, and could reap millions in profits without hiring more than a handful of workers or spending more than a small amount of capital. That would really be great.
If the person looks at you like you have cottage cheese coming out of your ears, then they are operating with a morally perverse frame of reference. They are making an ascetic imposition on the rest of us based on a preset determination of who they morally favor. It is the moral equivalent of a segregationist or a tyrannical monarch who forces women out of school. They are explicitly willing to harm the whole society if it seems to harm a particular group proportionately more. If cash is transferred to the group they favor (labor), they go so far as to treat costs as benefits. If cash is transferred to the group they disfavor (capital), they will treat benefits as costs.
It's disappointing to me how foundational this sectarian status battle has become in American politics. I see so many otherwise good, intelligent people proudly calling for the rights of other Americans to be curtailed - people who are keenly aware of these human tendencies when it comes to race, gender, and sexual orientation, and who actively fight for a better society in those realms, yet they engage so explicitly in motivated reasoning and ad hominem regarding economic matters. Get-out-the-vote rhetoric like, "Help make sure the voice of the 1% isn't heard this Tuesday." Profit as a reason to oppose something. Explicit calls to roll back Bill of Rights protections for commercial associations. I trust that the pendulum will swing back at some point. But it is a little frightening and disappointing to see how easily people can believe harm is a virtue.
This bias against capital is so built into our public consensus that introducing the idea in a conversation like this is generally met with bewilderment. It should be patently obvious that we are better off if some new service can be provided with less effort and material. Sadly, for most people, it is not. This is one of those cases - much like with, say, someone in a creationist community who is confronted with the evidence of evolution - where, on the facts, it seems like it should be very easy for people to see something. But, we are human. Community matters a lot to us. Affiliations give our lives meaning. Having villains, and sharing those villains with a group of like-believers, is powerful. If acceptance of a simple fact challenges that, it is most definitely not an easy thing to do. It could, in fact, be rational for that person to concoct a story that ignores the fact, but saves their personal identity. That doesn't mean it's good. Local optimums are not global optimums.
There is much moral similarity between strident moralists - think of angry marchers with anti-gay signs or anti-Wal-Mart signs. These are both working from sectarian impulses, yet thoroughly convinced that they are morally compelled. They are both working from a pre-determined set of good vs. bad, with a determined refusal to consider any of the constraints or needs of the chosen villain, a demand that you, nonetheless, bend your lives to their moral code, and a complete ignorance about what that would realistically entail created by a refusal to engage you with even the slightest empathy or understanding. And both insist on acting as if there is some damage being done to hetero families or workers, with reasoning that is highly motivated. I think that, even though there is a lot of discomfort still in our society regarding sexual identities, there is generally a consensus about the shamefulness of those protesters. Economics is a complex subject, so there will always be ignorance about it, but I would like to think that we will someday have the same consensus about both sets of protesters.
Human nature wants to make everything moral. We used to think that droughts and famines were the gods' punishment for our moral failings. We have shed those tendencies in so many ways, but we retain them in the realm of finance and economics. In the Wal-Mart or Keystone examples above, people are still imposing moral biases, consciously or unconsciously. Or, think of the Great Depression and the Great Recession. How many people believe that these events were payback for the "excesses" of the preceding decades? The inevitable falls from grace resulting from our greed. We make this error, and we end up destroying ourselves, as humans always have. We've come a long way, but we have a hell of a long way to go.
PS. I don't want to debate the pipeline itself. There may be other reasons to oppose it. I am speaking only about how the distribution of its economic effects would affect someone's support.
PPS. (added) One character of prejudice is that we impose a moral framework on our targets where we would allow ourselves to operate more pragmatically, and we ignore the constraints that our targets have in meeting our moral demands. The striking thing about this regarding anti-capital prejudice is that we have this remarkable, real-time measurement of the constraints on capital - the stock market. A butterfly flaps its wings in Bangkok, and the next day GE stock is down three ticks. Literally by the second, we can measure the constraints on capital. So I am blown away by the level of self-imposed obtuseness that leads to those back-of-the-envelope geniuses who figure out that Wal-Mart could raise wages or improve working conditions without losing profits, or better yet, gaining profits. Can you believe the $280 billion worth of capital trading up and down every second because of those wing-flapping butterflies missed this one? Stop watching those butterflies, people! That guy with the dreadlocks, the venti fair trade latte, and the necklace with the artisanal aboriginal pendant that's been out yelling at passersby in front of your store just made you a ton of money. He's got the basic idea scribbled out on a napkin in his back pocket. Do this before the guys on Shark Tank find out and steal the idea first!