Taleb's Elephant and the Belgian Budget
Today I overheard a would-be minister of our next government expressing concern about our budget. And it seems that if it's up to him, a budget control will be executed on a quarterly basis to check whether we are still on track. Well that would just be great, wouldn't it ? next ?
No. When hearing these words, I had 3 automatic reflexes. One, a sincerity I have heard many times before in the past but today's result is still there in budgetary terms. Two, the person who expressed these concerns was not an example of orthodox housekeeping (budget and accountancy) either. In fact, when asked about Leterme I, he once stated that although the budgets of our previous Purple governments weren't exactly an example of beauty either, at least the books were balanced one way or another. And 3, Taleb's Elephant.
About a year ago, we invited Taleb to elaborate on the financial crisis and sustainability of systems. Robust and fragile were the buzz words. And as far as robust is concerned, Taleb made a comparison with mother nature and the fact that almost every specimen alive has been constructed with idle capacity and rarely runs on 100% of its capabilities, the so-called precautionary motive. One exception, ie mankind, and this probably in case he majestically screws things up. And the mighty elephant is a good example. For Taleb, economic science is also an exception : it doesn't allow for redundancies (marginal calculus) and we like to optimize in true Ricardian spirit instead of being satisfied with some spare unused capacity (in portfolio investing dito, better to be over-insured /safe than being sorry).
Now it seems that for politics the same Ricardian logic applies but in reverse. In case of trouble, do the minimum. But no need to worry because we have a quarterly check. And the outcome of that check is quite predictable as we speak. It would be nice - and certainly under current circumstances - we would live in a world where these checks are obsolete, a kind of training drills. And it's perfectly possible if the ambition would reach higher. For example, make up a budget with a sufficient safety margin and whose ambition is to really start paying of debts instead of trying to stabilize it in an unstable disequilibrium. But that's the short term against the long term, "our" solidarity versus "inter-generation" solidarity. Briefly called politics I presume. In the meantime, I prefer to walk with the elephants.