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Uncertainty cont'd

Derek Thompson talks to Eric Spiegel, CEO of Siemens USA, and finds that he'd like to see the government reduce uncertainty by ... passing activist legislation that he likes:

Siemens, which engineers and sells equipment for the new green economy (among a thousand other things), needs assurances that the government will take more action to tip the scales toward clean energy.

Spiegel mentioned three key areas where Washington's failure to act had created uncertainty. First, the failure of the climate change bill means the country could go years without a carbon price to advantage clean tech. Second, he lamented the absence of a national renewable energy standard. Third, he expressed concern about the future of the wind turbine investment tax credit, which expires in 2011.

"If you don't do anything on carbon and you don't have renewable energy standards or investment tax credit, every utility company would go out tomorrow and build coal," he said.

Usually, business argues for their legislative preferences "because it would be good for business." Right now, the preferred phrasing is that "it would reduce uncertainty." And I'm sure it would! If the government would pass the "Give Ezra Klein a Billion Dollars Act of 2010," my financial future would become a lot more certain. But I only support that legislation because I'd like the particular future it makes certain. The "Throw Ezra Klein in Jail Act of 2010" would also increase my ability to do long-term planning, but I'm voting against it.

By Ezra Klein  |  August 10, 2010; 2:44 PM ET
 
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Comments

this must be quite confusing to doctrinaire liberals. They seem to believe that all corporate CEO's ( the corporatists) are nasty greedy republicans.

The facts are different. Businesses exist to turn a profit. If the way to do that is to lobby the government for a competitive advantage, that's what they'll do.

Of course siemens is an interesting example, since they have had no problem doing business with Iran's mullahcracy.

Posted by: skipsailing28 | August 10, 2010 3:06 PM | Report abuse

I said it yesterday:

When LOBBYISTS for Trial Lawyers, Unions, and Environmental Activists get to write & pass over 6,000 pages of complex legislation, small businesses all across the nation feel "uncertainty"!

Unfortunately for those who make a living following through on the plans of radical enviromentally active politcicians in a democracy, there is a lot of uncertainty in between the time that politician gets elected and when the tax-payer starts paying the bill of all his crazy schemes.

Posted by: FastEddieO007 | August 10, 2010 3:23 PM | Report abuse

I think his point is fair and clear. We should reduce uncertainty via legislation that supports green energy. This would result in a lot of green energy investment.

He makes it clear that reducing uncertainty in his not-preferred direction would also result in massive industrial investment. We just wouldn't like it (coal plants for everyone! yay!).

So, eliminate uncertainty ==> massive investment,

whether it's his preferred policies or not.

Posted by: eggnogfool | August 10, 2010 3:56 PM | Report abuse

"The facts are different. Businesses exist to turn a profit. If the way to do that is to lobby the government for a competitive advantage, that's what they'll do."

Yeah, I suppose particular businesses would seek competitive advantage through lobbying, and that's all fine and good. The problems are more 1) when a group tries to represent overall business interests (say, the Chamber of Commerce or Club for Growth) and ends up only favoring CEO pocketbooks over anything else, and 2) when business lobbying interests result in firm-specific growth at the expense to freer markets (corn subsidies, more licensing for professions, etc)

Posted by: Chris_ | August 10, 2010 3:58 PM | Report abuse

"Siemens, which engineers and sells equipment for the new green economy (among a thousand other things), needs assurances that the government will take more action to tip the scales toward clean energy."

Gee, it must be GREAT to have a private business with the full force of government behind your investment.

Posted by: WrongfulDeath | August 10, 2010 4:28 PM | Report abuse

@WrongfulDeath:

What business doesn't have the full force of government behind its investments?

Posted by: eggnogfool | August 10, 2010 4:32 PM | Report abuse

Uncertainty about what the government is going to do is a factor, but uncertainty is also created by unemployment numbers, dips in the stock market, Excel spreadsheets showing falling sales, austerity programs in the European Union, etc., etc. Obama could provide certainty--these taxes: yes, these: no, cap and trade, and I'm done--and in the end that wouldn't make that much of a different.

3 months of increased sales to the midwest, then businesses might start hiring, or buying more durable goods, or what have you.

In fact, I wonder how much a problem uncertainty really is. The owner might die. The market might crash. The meteor might strike. There might be a tragic act of terrorism. Are we all really sitting on our hands and doing nothing until we're absolutely sure none of those things are going to happen?

Posted by: Kevin_Willis | August 10, 2010 4:48 PM | Report abuse

@Kevin:

Uncertainty makes about 0% difference for current production levels and about 100% difference for long term investment levels,

where current demand/economic outlook makes about 100% difference for current production levels and 0% difference for long term investments.

You aren't going to worry too much about things that have less than a 1% chance of happening, but if the set of adverse possibilities has an aggregate likelihood over 10%, you may hold off, especially if you have reason to think you will be operating with better information in the near term.

Posted by: eggnogfool | August 10, 2010 5:01 PM | Report abuse

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