Wednesday, September 15, 2010

Uncertain Future

Matt Yglesias writes:
I’d be fascinated to hear Otellini [, CEO of Intel], describe to me the past era in which firms knew exactly what their health care, energy, and tax costs were going to be. This was a time in which the future trajectory of oil prices was entirely predictable, and it was clear that congress would never again alter the tax code. A time when general macroeconomic conditions were not subject to any vagaries of fortune. A magical time.

FLG chalks this up to two things. First, Matt is a progressive and, according to FLG's theory of time horizons, discounts the future at a much higher rate than conservatives. Second, he's talking about some sort of binary certain-uncertain, which may be because of the previous point FLG just made (discounting the future so steeply lowers the impact of fluctuations), but also could be for pure polemical effect.

Anyway, the future is always uncertain. Sure. However, there is a large probability of exogenous shocks created by government policy in these areas. This isn't to say that exogenous shocks aren't possible at any time in any area, but when you know there's a high probability of them, then it makes sense to let the dust settle before making long-term plans.

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