The first is that you are being LIED TO when it comes to our “improving” economy.

While often true, it should come as no surprise to any functioning adult that politicians will, and do, lie. That’s neither newsworthy nor remarkable. What is misunderstood is that Politicians see themselves not as lying, but as “nudging” you, and in their fallacious reasoning that the end justifies the means, they justify the nudge with their unwavering devotion to behavioral economics.

Everyone in the present administration who is in a position to speak on official economic policy (which of course does not include Paul Volcker) is not just high on, but is metaphorically STONED on the Thaler / Sunstein stampeding herd dust-inhalation-therapy of behavioral economics, as espoused in Freakonomics, Nudge, Predictable Irrationality, The Wisdom of Crowds, and Animal Spirits. We have covered in several posts (just search “behavioral economics” above) how the “perception dictates reality” mantra of the behavioral economists has so thoroughly infected this administration that every single one of Obama’s Imperial Czars subscribes to it, as just seen again with Herb Allison’s recent Geithneresque statements regarding extending the TARP bailout:

“In this context, it is prudent to maintain capacity to address new developments,” Allison told the Senate Banking Committee. “By bolstering confidence, having such capacity may actually reduce the need to use it.”

Whenever you hear a Politician talking about bolstering CONfidence in the economic system with your next bailout tax, the CON in that statement is the lie, and the “bolstering” is the justification of that ”nudge” for all devout behaviorist Thalerians.

The idea that “Politicians are stupid” also gets a lot of traction these days, but that too is somewhat a misconception.

While some are smarter than others, what they are all most practiced at is the avoidance of pain, as it applies to the process of being re-elected. Politicians are terrified at the prospect of administering distasteful medicine today to avoid the slow and agonizing death of tommorrow. They believe that their constituents are basically irrational animals, driven by the preservation instict of the herd–who will all stampede to the next “sweet talker” who tells them everything they want to hear, whether it’s possible to keep such promises or not.

Is this sounding familiar yet? I hope so, as it may help to clear up the two most often stated political misconceptions I’ve encountered. Instead of seeing our administration as a pack of stupid liars, see them as failing their responsibilities out of a fear and misjudging of the American People they were elected to serve.

That understanding of our political leadership, and all subsequent actions that follow, may have a more positive impact on the Obama administration than anything, if there can be any positive impact at all.

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