I’ve posted favorably about regime uncertainty theory here a few times, and there’s a response that’s been bugging me for some time. So for no particular reason I’m going to talk about it now.
The response is, “business surveys don’t show regime uncertainty as the problem, they show businessmen claiming there is a lack of investment opportunities.” But that response is empty. Uncertainty creates a lack of good investment opportunities. If businessmen are very uncertain about what the game will be like in the future investment opportunities will not look good, hence there will be a lack of good investment opportunities. In other words, the response is potentially nothing more than a restatement of the theory it supposedly rebuts.
My criticism doesn’t actually provide any support for uncertainty theory itself, and I’m comfortable admitting it isn’t proven. My point is simply that the surveys don’t actually disprove it–in fact most don’t, I don’t think, actually address it directly.
But at least one business survey does, and that one does show some support for the theory. The October 2010 PNC Economic Outlook Survey reported that “Government policy uncertainty” was listed by 21% of respondents as one of their top challenges, second behind weak sales (34%). Proof? No. Evidence that the theory might be worth taking seriously? Yes.