Wednesday, April 28, 2010

Public opinion and financial sector reform

David Harsanyi's latest column does a nice job explaining why I don't put a lot of stock in public opinion polls which invariably reveal support for more regulation and "getting tough" with Wall Street:
Using stale populist rhetoric, Democrats dishonestly pit families against "banks" to generate enough support to pass a fiscal reform bill. But how many voters manipulated by the fear-mongering of Chris Dodd, Reid, or Barack Obama fully understand reform? I sure don't. It's complex stuff, no doubt.

How many of us are aware that these derivatives that politicians rail against are financial tools that often allow people to hedge bets and take insurance on risk? As The New York Times recently reported, entities like Mars, the maker of M&M's, like to dip into the derivative market to insulate themselves from fluctuating prices of sugar and chocolate.

How many voters are aware that the pending Senate reform bill includes a payback to unions in the form of a "proxy access" that would allow labor to manipulate company boards? How many are aware that the bill may give the Treasury Department the right to seize private property and businesses without any significant judicial review?

How many Americans are aware that the reform bill might create a so-called "consumer protection board" that would slather another needless layer of federal red tape on a wide range of businesses—businesses, incidentally, with far less culpability in creating the housing bubble than members of the Senate Banking Committee.

At the same time, the board also may ban private, voluntary arbitration agreements between consumers and financial firms. Why?

How many voters are aware that the Senate reform bill would clamp down on "angel investors"—wealthy individuals who invest in startups with few regulatory guidelines. From Google to Facebook, it was angel investors who undertook the initial risk.
I haven't done any in-depth research on this, but I suspect the proportion of Americans who are particularly knowledgeable about finance and securities law is rather low, while the number which associate more rules and regulations with cutting down on malfeasance is pretty high. This, in turn, lends itself to the kind of mindless demagoguery which has been on such vivid display. It's a poor way to govern, and all of us are going to be worse off because of it.


Atticus said...

Interesting - you had no problem putting stock in the polls on Obama's job approval rating and HCR, which according to you, invariably revealed opposition to the Democrat's plan. See:

Something to keep in mind the next time you post a poll supporting your point.

Colin said...

You are absolutely right, I presented numerous polls on health care and President Obama's performance. How that is relevant, however, I am not sure.

Maybe you can take a closer look and prove me wrong, but I don't think I have ever said that a certain piece of legislation should be approved or defeated based on public opinion. While I paid close attention to polling on the health care issue for example, I did NOT criticize Democrats for going against the public will. In fact, in private conversations with people I recall specifically saying that I found that argument not terribly compelling, since frankly there are a lot of things I believe in -- abolishing the Department of Education for example -- which I know are both correct but would poll horribly.

You can look back at my Health care retrospective post:

and will notice I didn't criticize the Democrats on this point (although I did not it boded poorly for their election prospects). That was a conscious decision on my part.

The health care polling was interesting as an indication of HCR's chances for success (as politicians are generally self-interested creatures). It was not used as an argument against HCR.

Atticus said...

It is relevant because it calls into question the relevance of the post.

I didn't say anything about how you use polls, just that you have in the past when they've been favorable to your position. Did you not take stock in those then? And if not, why did you continue to point to them?

Colin said...

I think it was useful to pay attention to the health care polling for two reasons. The first is that it indicated health care reform's likelihood of passage.

The second reason is that, unlike the finance legislation which will have the bulk of its direct impact on bankers and Wall St., the health care legislation stands to have a very real and direct impact on almost literally every person in the country (e.g. health insurance mandate). People tend to pay more attention to things which impact them rather than some third party.

I think most people understand the basic concept of health insurance. I can't say the same about derivatives and angel investors.

Atticus said...

The notion that polls are only relevant if they are on issues that have a broad impact is bizarre. Saying that polls are only valid if they are on issues an average American can understand is even more so. (I'm still not sure how the polls on the President's approval rating pass this test.)

Having worked on the Hill for several years, I can tell you that the average American is just as likely to understand angel investors and the derivatives market as they are FISA, ag subsidy payment structures, or health care. All policy/legislation is complex, leaving all Americans subject to demagoguery.

Colin said...

Saying that polls are only valid if they are on issues an average American can understand is even more so.

Really? You place no more stock in a poll on a subject that is easily understood vs. one that is arcane or esoteric?

Would you place equal amounts of stock on a poll of Americans measuring their support of, say, a local measure to raise property taxes to increase funding for local schools vs. a poll of Americans on whether Germany should bail out Greece? Do you really see no difference in the validity of the two?

Atticus said...

we're getting further away from the initial point, which is that it is hypocritical for you to say that you don't take stock in public opinion polls while using them in your posts.

This has now dissolved into an issue of what topics Americans genuinely understand - and to what degree. Neither you nor I can gauge that.

Colin said...

we're getting further away from the initial point, which is that it is hypocritical for you to say that you don't take stock in public opinion polls while using them in your posts.

Not true. I don't put a lot of stock in public opinion polls on financial regulation, not public opinion polls in general. Re-reading my post, I can see how my opening sentence could be misinterpreted, but the point I was trying to make is that I don't think most Americans have a very good grasp of the vagaries of finance reform, and thus such polls doesn't seem particularly meaningful. The more esoteric the subject material, the less meaningful the poll.

Atticus said...

Thanks for the clarification.