I couldn’t decide when to write this week’s blog post. I could do it right now (Friday) and free up the weekend for dancing like Zorba and drinking like Putin. Or I could wait until late Monday night and do it at the Varsity like my roommate Jim K did his homework back in 1965. I was never good at procrastinating and went ahead and starting writing this on Friday. That decision made me think of other timing issues. For examples see some of my favorites below and feel free to write in your own:
· Pay our national debt now or maybe later?
· Fight ISIS now or maybe later?
· Allow most illegal immigrants a route to citizenship now or maybe later?
· Turn in your elderly husband now or maybe later?
· Discipline your child holding the screwdriver near the electrical outlet now or maybe later?
· Vigorously attack global climate change now or maybe later?
· Replace your 1963 Lada now or maybe later?
· Stop Putin’s geographic aggression now or maybe later?
· Cheat on your income tax this year or maybe later?
· Open up a personal saving account now or maybe later?
So you get the drift, right? Isn’t it amazing how so many of our most pressing decisions and challenges revolve around WHEN to act. It is not a simple yes or no. We know acting is important but the question is when.
Luckily economists who got tired of macro and location theory pioneered a concept called the "cost of waiting". Unluckily for us, most of these models are framed in models that require an abacus and very advanced mathematical knowledge like foot stomping. So let me just outline the basics of an economist’s theory about the cost of waiting.
First, we assume that there is something that needs to be done. Let’s call that – taking your dog Rufus for a walk.
Second, we assume that we have some leeway as to when Rufus gets his exercise.
Third, there are benefits associated with waiting until later. For example, you just poured a lovely JD and you don’t want the ice cubes to melt and water it down too much. After all, the JD people went to a lot of trouble to create that lovely taste. Also, you are watching the Ellen show and you heard that LL Cool J is coming on soon wearing a short Kilt.
Fourth, there are costs associated with waiting. Rufus is walking around in circles for a good reason. He has to pee right now. Rufus cannot take himself for a walk since that violates HOA rules. And you are the only one who can clean that expensive room-size woven Persian rug.
So there you are – you are now an expert in cost of waiting models. And you realize you can make a truly objective and life maximizing decision by measuring and comparing the extra costs versus the extra benefits of waiting one more minute. Here are the three decision rules:
If the extra cost of waiting one minute exceeds the extra benefit, then go now.
If the extra benefit is greater than the extra cost of waiting one more minutes, then wait at least another minute.
If the extra costs and benefits of waiting one more minute are equal, then kiss your dog, pet your wife, and say goodnight Dick.
So here is my question. Of the issues I listed above, to what extent do any of the arguments you hear and read focus on anything close to a real analysis of the costs and benefits of waiting? Or to put it another way – if the main arguments do not fit the model, then what do they fit? This is where ideology comes in – and causes a real mess that prevents a real solution.
Let’s take climate change. Liberals want much more done right now to stop climate change. They refer to models that show dramatic negative consequences of waiting too long. Do they ever discuss the benefits of waiting? Do they assume these benefits are all zero? Or do liberals simply assume they are negligible. Maybe liberals would be more believable if they even pretended to act as if this were not another ideological preference.
Conservatives like me are pretty vocal about the national debt. We make a strong case for the possible future costs associated with waiting to reduce the size of the debt. We can be quite colorful in describing a Greek-like future for the US economy. But liberals say pashaw or dude or something like that. Dude, lots of countries have large national debts and they do just fine. Maybe conservatives in a rush to reduce the US debt should spend more time evaluating the benefits of waiting on the debt? Or are they surely zero? Maybe we conservatives would be more believable if we at least faked an even-handed analysis of the costs and benefits of waiting.
Some might say that letting the liberals and conservatives debate these issues will bring out all the sides of the decision to wait and then voters can decide for themselves. Well, it seems to me that day is over. People have already lined up ideologically. They care little for a real analysis. They just want to be on the side that wins. Is this the kind of democracy we fought so hard to preserve? Does economic analysis become useless in such a world?