American Elephants

The Nature of Negotiation, And Why It Doesn’t Work! by The Elephant's Child

Negotiation is hard, depending on how far apart the parties are on their beliefs. Add in the political ploys designed to give the media talking points and to sway public opinion. Add in the extent to which the parties represent their policies and view of history truthfully, and you end up somewhere like where we currently are.

It is all summed up quite well in Thomas Sowell’s 1987 book A Conflict of Visions: Ideological Origins of Political Struggles, which in turn looks back to Adam Smith’s 1759 Theory of Moral Sentiments and William Godwin’s 1793 Enquiry Concerning Political Justice. Sowell calls these the constrained vision and the unconstrained vision. Adam Smith saw the natural flaws of man as  simple human nature and inherent facts of life. The fundamental moral and social challenge was to make the best of the possibilities within that constraint, rather than dissipate energy in trying to change human nature. Smith attempted to determine how the moral and social benefits desired could be produced within those constraints. Smith’s answer was Incentives such as devotion to moral principles, concepts of honor, really an economic answer — a set of trade-offs rather than a real solution of actually changing man. The constrained vision accepts human nature as a given, and unchangeable.

Godwin believed the intention to benefit others was the essence of virtue, and virtue was the road to human happiness. Man was capable of directly feeling other people’s needs as more important than his own. Man’s current egocentric behavior did not mean that it was a permanent feature of human nature that was promoted by the very system of rewards used to cope with it. Godwin was not concerned with the immediately effective incentive under the current state of things. The real goal was the long-run development of a higher sense of social duty. The potential is quite different from the actual, and means for improvement can be discovered or developed. In other words imperfect man was perfectible. The unconstrained vision looks for solutions that will change human nature.

The key insight from Adam Smith’s Wealth of Nations: If an exchange between two parties is voluntary it will not take place unless both believe they will benefit from it. Most economic fallacies derive from the neglect of this simple insight, from the tendency to assume that that there is a fixed pie, that one party can gain only at the expense of another.  Milton Friedman

From Breitbart: “According to John Podesta, founder of the Center for American Progress and former Chief of Staff to President Clinton, President Obama told him that he would never again bargain with Republicans to extend the debt limit. Podesta said that the 2011 Budget Control Act, which ended the debt ceiling debate two years ago, “sent a signal that this was fair game to blackmail  over whether the country would default. He feels like he has to end it and end it forever.”

“Obama has taken a no-negotiations stance on the debt ceiling debate, sending the true signal to the market that he is willing to default on debt if Republicans do not fund the government in accordance with his wishes. Podesta said that Obama will “be viewed as a guy who you can hold up” if he gives any concessions at all on the debt ceiling.

“The stock market has rallied around the notion that the debt ceiling debate will come to a conclusion before the United States defaults. That’s largely because Republicans are signaling that they want to extend the debt ceiling. “Mr. President, let’s sit down and talk,” House Majority Leader Eric Cantor said. “Let’s reach consensus and end the ‘my way or the highway ‘ attitude once and for all.” …Obama takes solace in the fact that Republicans are being blamed more than Democrats for the current impasse, thanks largely in part to media coverage.”

The problem is that Republicans and Democrats are not speaking the same language, and each side is bargaining from a viewpoint the other side does not understand. Republicans are deeply concerned about the amount of debt Obama has run up — not because it’s Obama’s debt, but because it is too much debt and is doing damage to the country. Obama, a believer in Keynesian economics, believes that spending is necessary to help the country recover, and the reason that stimulus hasn’t worked enough to restore the economy is because the stimulus wasn’t big enough. Republicans believe that much of Obama’s spending has actually increased the numbers of the unemployed and overregulation has cost thousands of jobs.

Obama said in his weekly sermon:

It’s a positive development that House Republicans have agreed on the need to avoid the economic consequences of not meeting our country’s commitments. Because once the debt ceiling is raised, and the shutdown is over, there’s a lot we can accomplish together. We’ve created seven and a half million new jobs in the past three and a half years.

Now let’s create more. We’ve cut our deficits in half over the past four years. Now let’s do it in a smarter, balanced way that lets us afford to invest in the things we need to grow. The truth is, there’s a lot we can agree on.

The other thing Obama said was to blame Republicans for — practically everything — in every other sentence. “flirt with a first-ever default right in the middle of the holiday shopping season.””the pain of this Republican shutdown.” “Manufacturing crisis to extract massive concessions,” ” A political party is risking default for the first time since the 1700s. This is not normal.””constant brinkmanship.” “It saps everyone’s faith in our extraordinary system of self-government.” “Politics is a battle of ideas, but you advance those ideas through elections and legislation — not extortion.”

The president has a bigger microphone, and it is echoed by a compliant media. Polls do blame Republicans more, but do the polls mean anything? Obama has gone way too far in his righteous indignation. He has threatened the markets, taking the Dow Jones down. Retailers have taken a real hit.  He has hinted that Social Security checks might not go out. (Is he ready to admit that there is no trust fund?)  And he has no concern whatsoever about whether his words are true, and all too frequently they are not.

So you  have a “negotiation” where neither party understands where the other side is coming from, they do not mean the same thing by their words, and they have different ideas about their personal responsibilities to the country. What could possibly go wrong?

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