Monday, August 29, 2011

Financial Savvy Test for Politicians

BC’s vote to scrap the HST brings up the question of what happens to the $1.6 billion the federal government gave BC to implement the HST. It seems natural that the money has to be returned, but apparently the NDP disagree. This willingness to hand out money so freely makes me wonder if politicians should have to pass some sort of financial savvy test.

You might point out that politicians understand financial matters just fine and they act out of self-interest. This is likely true much of the time, but I wonder if sometimes politicians genuinely don’t understand basic financial facts.

Here is a simple essay question that intelligent adults should be able to answer correctly to have any hope of running a government:

Explain why having the government give every Canadian ten million dollars wouldn’t make us all rich.

If that one proves too difficult, maybe the following question is a little easier:

Suppose that ten people are adrift on a life boat. The only food they have is ten cookies. Explain why making a rule that each person is entitled to three cookies won’t help.

Any other ideas for good financial test questions?


  1. The problem is with the voters. The politicians are just demagogues.

    Henry Hazlitt wrote in his book "Economics In One Lesson" the following:

    "Economics is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject would be great enough in any case, but they are multiplied a thousandfold by a factor that is insignificant in , say, physics, mathematics, or medicine -- the special pleading of selfish interests."

    It takes years of study to understand these fallacies, yet as a voter, you only get one vote. This is the flaw in democracy, that the votes of those who understand are diluted away by the votes of the ignorant.

  2. @Ahmed: To butcher a famous saying, democracy is the worst political system except for all the others.

  3. @Michael, actually democracy is the worst political system. That's why the founding fathers in America wanted nothing to do with it. For that reason, they instituted a republic.

  4. Don't tell me about physics - I voted against gravity!

    If prices in BC rise in the next couple of years it would be interesting to see protests against the PST. It probably wouldn't end up being a difference big enough for the average person to notice though, especially since the HST didn't last long.

  5. Another amusing comment I read after the vote was "the gold and forests are here, businesses can't go to other provinces". So to set those misguided economists straight, HST is only beneficial if you want one of them diversified economy thingies.

  6. @Value Indexer: I'd like to think that Canada has a plan after our resource revenue starts to drop, but I'm not hopeful. What useful things do we do other than dig stuff out of the ground? Not enough.

  7. I would expect a certain level of revenue to continue for a long time (although counting on the cyclical peaks would be a bad bet). That doesn't do as much for anyone who's not involved in natural resources though apart from helping to fund the government and creating a smaller market for a few secondary services. I'm sure quite a few people in Vancouver aren't there just for the gold, trees, and views. I wouldn't want to turn the whole country into Fort McMurray!