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Calling Mark Perry

In this comment on Steve Landsburg’s recent post “Why She Lost,” David H. (who I’m quite certain isn’t EconLog’s David Henderson) writes about Hillary Clinton:

Her tax proposals on short term capital gains would be subject to a spirited debate in the House and Senate, but most economists believe the downside of increasing taxes would be offset by the upside of starting to combat “quarterly capitalism.”

I don’t know if David H. is correct in his claim about what a majority of economists believe.  (He might well be correct, for in recent years the ability of the typical economist to wisely assess policy has plummeted.)  Either way, assertions of the reign of “quarterly capitalism” are common, especially on the political left.  Also common on the political left are assertions that First Amendment protections for political speech – such as were upheld in Citizens United – are used by corporations to affect political outcomes in ways that are beneficial to corporations but baneful to the general public.  Indeed, Hillary Clinton herself wants to amend the U.S. Constitution to overturn Citizens United.

Yet the simultaneous holding of these two beliefs reveals inconsistency.  Whether or not unregulated campaign financing harms society, the benefits that corporations reasonably expect to reap from their campaign expenditures do not materialize in the same quarter in which those expenditures are made.

First, many political campaigns span, not a few months, but a year or more  Each U.S. presidential campaign these days invariably spans more than a year.

Second, the actual securing of pro-corporate legislation and bureaucratic rule-making typically, or at least often, takes more than three months.

Third and most importantly, the increased stream of profits from such legislation and diktats typically, or at least often, takes even longer to start arriving in corporations’ coffers, and the full stream invariably takes longer than three months to arrive.

Those who worry about “quarterly capitalism” are not permitted here to point out the correct fact that the anticipation today of increased streams of future profits from favorable policies are reflected today in increased corporate share prices.  The very nature of “quarterly capitalism” is that corporate decision-makers, including shareholders, care about nothing beyond the next quarterly reports and that investors and other market actors do not capitalize today, in the prices of corporate shares, the anticipated value of costs to be incurred, and benefits to be received, beyond the end of the quarter.

As Mark Perry might say, those who worry that Citizens United is a green light for corporations to spend in ways that reap corporate benefits at the expense of society and who worry also that corporate decision-makers are so myopic that “quarterly capitalism” is real do not have a strong need for intellectual consistency.