In a recent article by The Economist, “Self-Induced Recession”, the constant battle between economics and politics on issues such as recessions are highlighted. According to the speaker, financial markets react predominantly to political development as opposed to economic ones. “A global economy with decent cyclical fuel and no obvious imbalances is being betrayed by politics” (G.I., 2011).
When most economists were warning of inflation, policy makers didn’t listen and when economists were predicting recessions, policy makers ignored them. Additionally, the article states that Europe’s recession, which is completely unnecessary, stems from an “erroneous diagnosis of the cause of the crisis” (G.I., 2011).
I found this article to be particularly interesting because we had recently discussed the European, and more specificly the Greek, recession in a COMM101 class.
The discussion was based on the fact that, despite the vast majority of economists agreeing on an issue, such as in this case the recession in Europe, politicians and policy makers are considering and then ignoring their advice. Why? This is simply because politicians care about the opinions of the general public and voters, most of whom don’t have any general understanding of the nature of economics.
Another example was the governmental regulation of apartment rent prices, which economists generally agreed was a bad idea. However, these regulations sparked a lot of debate in Vancouver, due to the exponentially rising prices and eventually, the government implemented rent price restrictions in select areas because voters were concerned with prices, not the economy itself.