Between the idea

And the reality

Between the motion

And the act

Falls the Shadow

— T.S. Eliot, “The Hollow Men”

Economic policy is based largely on theories of how people respond to incentives.

Lower interest rates, and people and businesses will borrow more, thus jump-starting the economy.

Get money from rich people by selling bonds and raising taxes to fund “shovel-ready” government jobs programs, and people will spend more, thus stimulating economic growth.

Neither policy seems to be working.

It has now been three years since the “official” end of the Great Recession, and both economists and citizens are scratching their heads wondering where’s the connection between theory and practice, between stimulus and response, between intent and accomplishment. Like physicists searching for the Higgs boson, economists are pouring over the detritus of the last great economic collision, searching for the behavioral links that will make sense of our collective activity.

Much of that search is focused on the idea of expectations.

Since 1967, the Conference Board, an independent business membership and research association, has gathered and published the Consumer Confidence Index. It is based on the answers provided by a nationwide sample of households to a series of questions that, at base, amount to opinions or feelings about, first, how things are now compared to six months ago and, second, how things will be six months in the future.

Understanding that “things” mean “business conditions,” “employment” and “your income,” businesses and policy makers follow the index closely as an indicator of what consumers are going to do.

Some argue, “What’s the point of putting so much time and expense into gathering the opinions of people who, like the rest of us, are basically clueless?

If you want wild guesses about the future, it’s cheaper, quicker and equally informative to look at the Dow Jones stock index every day.”

Others say, “No, it’s not the accuracy of their predictions we’re after, it’s their feelings.”

And it’s in this realm, this shadow, of feeling that the link between policy and result lies.

Four years ago, millions of voters threw their support behind the idea of “hope and change.” Two years ago it was the “don’t tread on me” feelings of people harkening back to the Boston Tea Party. Last year it was the largely incoherent feelings embodied in the Occupy movement.

People are clearly surging back and forth, expressing strong feelings and searching for directions to follow.

People want explanations that make sense.

They may respond to attack ads that blame everything on the other guy, and it looks like that’s what we’re going to get.

But blame simply masks and reinforces existing feelings. It doesn’t change them.

People want reasons to feel good more than they want justifications for why they feel bad.

And that’s where the opportunity for leadership arises. Just as the “animal spirits” of a determined entrepreneur can drive technological advance, business investment and job creation, so can the “animal spirits” of a dedicated political leader drive the expectations of a town, a state or a nation.

What our economy needs today is not the ever-darker shade of blame cast upon the shadow between expectation and reality, but the clear light of explanation.

Provoking fear just might get someone elected, but only building faith in a vision for the future will make the effort worthwhile.

Charles Lawton is senior economist for Planning Decisions, a public-policy research firm. He can be reached at:

[email protected]


Only subscribers are eligible to post comments. Please subscribe or to participate in the conversation. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.