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Brooks Wilson's Economics Blog: Stossel's "Parasite Circuit

Friday, February 26, 2010

Stossel's "Parasite Circuit

By the amount of attention from the media and the Congress that the acceleration problem in some Toyota models has received you might think that thousands have died but you would be wrong.  John Stossel, a uniquely insightful reporter, describes the relative size of the problem in "The Parasite Circuit" from his blog on Fox News.
The scare-of-the-day is always used by politicians to grab power. But to put the Toyota problem in perspective, before all the media hype, 19 fatal accidents were linked to faulty gas pedals and floor mats over the last decade. That's fewer than 2 each year. Compare that to America’s 40,000 annual fatal car crashes.

As David Champion, director of automobile testing for Consumer Reports, said to The Guardian:

"I find it a little odd that we're going to have a Congressional hearing to look at those two deaths out of 40,000...  you have to look at death rates in safety terms rationally."

No one looks at safety “rationally” when the media and Big Government are stirred up.
I agree with his conclusion that elected officials like manufacturing crisis that and that these crises often give rise to parasitic lawyers and that this circuit is bad for the economy but this practice may be rational if their objective is reelection and crisis mongering improves their public image.  Their image does need polishing.  (HT Drudge Report) The Rasmussen Reports published the results of a survey that finds that 71% of the House and Senate are doing a poor job and only 10% believe that it is doing a good or excellent job ("Congressional Performance").

A systematic bias in the public's understanding of economic issues might cause voters to frequently buy political attacks on business and promote those officials who lead the charge despite bad economic outcomes.   Bryan Caplan concludes that non economists suffer from antimarket bias, the tendency to underestimate the effectiveness and benefits of the market mechanism, in his book, "The Myth of the Rational Voter."[1] 

Not only is the "parasite circuit" bad for the economy but populist legislation to solve insignificant problems is as well.

Does anyone really believe that Toyota has grown to be the world's largest automaker by not listening to consumers or by making bad, unsafe vehicles?  Does anyone really believe that the Congress has such high values that they would avoid passing bad legislation that would help them to win reelection?  Who do you trust more, your Congressman or Senator or Toyota?  

[1]  See "The Views of Economists and Non Economists On The Economy (Repost I)" for a brief review of the four systematic biases that Caplan finds in the public's view of the economy based on survey data.

1 comment:

  1. In addition to the politicians grandstanding on an issue such as this, one also needs to remember that the 24 hour news channels need to fill up their program schedules, so any kind of fearmongering or scandal will easily be protrayed as news and to fill up more time the networks "experts" will analyze the pros and cons of the story, such as the Toyota problem, no matter how apprently tiny it is in the big picture of total auto accidents and deaths.

    Lance Haltom