A new Gallup poll of small-business owners provides evidence about what they’re worried about. Gallup themselves title an article on the survey results “Gov’t Regulations at Top of Small-Business Owners’ Problem List”. They present the following table, which is topped by “complying with government regulations”.
One thing that jumped out at me is that complying with government regulations is the most important problem for 22% of respondents, compared to 18% in the most recent NFIB survey. One explanation for this difference could be simple margin of error: it is, after all, only 4 percentage point. However, Gallup respondents perceive regulation to be an a even bigger problem if you include “new healthcare policy” and/or “poor leadership/government/president”.
Another explanation for the difference could be the wording of the question. Gallup asks:
“What is the most important problem facing small business owners like youtoday?”
whereas NFIB asks:
“What is the single most important problem facing your business today?”
The subtle wording difference here could be consequential. It is quite easy to imagine a small business owner allowing his ideological bias to affect his beliefs about the problems facing businesses like his, but having more realistic understanding of the problems facing himself. It is likely that the latter mistake would be more costly than the former anyway.
Another difference is that in the Gallup survey, “lack of consumer demand” was cited by 12% compared to 28% who cited “poor sales” in the NFIB. However, Gallup also has “consumer confidence” as the most important issue for 15%, which you could combine to 27% for “consumers” as the biggest problem, which is close.
When it comes to what businesses would need to see in order for small businesses to thrive, the evidence again favors demand explanations over regulatory ones. Only 12% felt that “fewer government regulations” would be sufficient, and 6% cited better tax laws. Growth in sales was 15%, consumer confidence was 5%, and an improved economy was 8%. How many of these can you pin on aggregate demand?
Overall, signs continue to indicate aggregate demand is a more important problem problem than regulations. Hat tip to Catherine Rampell.
17 comments
Comments feed for this article
Monday ~ October 24th, 2011 at 10:17 pm
Sebastien Theriault
It seems to me that you did not read this passage of Jean-Baptiste Say’s book : A Treatise on Political Economy. For your personal knowlede : http://oll.libertyfund.org/?option=com_staticxt&staticfile=show.php%3Ftitle=274&chapter=38000&layout=html&Itemid=27
Tuesday ~ October 25th, 2011 at 3:18 am
FT Alphaville » Further reading
[...] The concerns of small business owners (and the importance of [...]
Tuesday ~ October 25th, 2011 at 5:12 am
Salem
I’ve got to side with Russ Roberts on this one. “Growth in sales” is extremely generic. It encompasses both aggregate demand and non-aggregate demand issues.
For the sake of argument, suppose I am a widget manufacturer, and my biggest problem is government regulation. Specifically, I had to spend more than I should have on the plant in my factory because of excessive health & safety and environmental regulations. As a result, instead of it costing me X to make a widget, it costs me X + 20, and instead of selling them at Y, I sell them at Y + 10. Result: lower sales and lower margin on the sales. Poor me.
But at the same time, the only way my business is going to thrive in 2012 is if more customers start buying my product. It doesn’t even matter if the government relaxes regulations, as my capital costs are already baked into the pie. So even though we agreed the problem is regulation, I’m going to answer “higher sales” to the open-ended question.
And I don’t even care why customers start buying my products – it could be aggregate demand, or it could be sectoral shifts, or my competitor going out of business, or it could be anything at all. Irrelevant to the widget manufacturer.
Tuesday ~ October 25th, 2011 at 5:15 am
rjs
anecdotally, governement interference as the only thing small business owners i know talk about…
Tuesday ~ October 25th, 2011 at 9:06 am
Secondary Sources: Home Affordable Refinance Program, Flat Tax, Small Business - Real Time Economics - WSJ
[...] by consumer confidence in the economy (15%) and lack of consumer demand (12%).” Adam Ozimek takes a look at the data and still sees demand as the primary [...]
Tuesday ~ October 25th, 2011 at 9:34 am
Bob Murphy
Adam Ozimek wrote:
When it comes to what businesses would need to see in order for small businesses to thrive, the evidence again favors demand explanations over regulatory ones.
What is that word “again” doing in this sentence? In the beginning of the post, you had to go through somersaults to explain why demand explanations came in as *less* important than regulatory ones.
So it seems a more accurate phrasing would have been, “…the evidence here favors demand explanations, which contradicts the earlier evidence and leads me to believe that first ranking was an anomaly.”
Arithmetic does indeed have a well-know Keynesian bias?
Tuesday ~ October 25th, 2011 at 9:55 am
Adam Ozimek
I don’t see any somersaults, Bob. But then again, I don’t have my entire ideology invested in this question so I don’t need to see anything that’s not there. If anything, I’d be glad to believe that regulation was causing our economic problems. That would confirm my ideological priors of the negative impacts of regulation. But that’s not what the data are saying.
Tuesday ~ October 25th, 2011 at 10:10 am
Adam Ozimek
That came out slightly bitchier than I meant it to. You know what I mean though.
Tuesday ~ October 25th, 2011 at 5:32 pm
Bob Murphy
Adam, fair enough, and my initial comment probably sounded worse than I intended it too.
But to repeat, why are you saying “again” after dealing with the fact that regulation came in as the #1 problem people cited in this survey? There was prima facie evidence against what you claim is the right explanation, and then you tried to minimize it. OK fine, but then don’t say “again” when you move on to data that actually support your interpretation.
Tuesday ~ October 25th, 2011 at 6:30 pm
Adam Ozimek
So you wouldn’t put consumer confidence and lack of consumer demand together as representative of demand? Note these weren’t two options from which people selected one or the other, but the aggregated results of open-ended questions. My point is that the best interpretation of the first datapoints tell you that regulation is not the #1 problem.
Tuesday ~ October 25th, 2011 at 10:06 am
Secondary Sources: Home Affordable Refinance Program, Flat Tax, Small Business – Wall Street Journal (blog) | News Online
[...] by consumer confidence in the economy (15%) and lack of consumer demand (12%).” Adam Ozimek takes a look at the data and still sees demand as the primary [...]
Tuesday ~ October 25th, 2011 at 10:22 am
Potpourri
[...] bad sales than regulations? Well, when a survey shows the exact opposite, they still take it as further evidence that the demand-side story is right. (Note that I’m not saying the Gallup poll is decisive, [...]
Tuesday ~ October 25th, 2011 at 12:56 pm
Lack of Spending, Not Kenyan Socialism, Is the Most Important Problem
[...] Adam Ozimek comments on the new Gallup poll of small businesses: When it comes to what businesses would need to see in order for small businesses to thrive, the evidence again favors demand explanations over regulatory ones. Only 12% felt that “fewer government regulations” would be sufficient, and 6% cited better tax laws. Growth in sales was 15%, consumer confidence was 5%, and an improved economy was 8%. How many of these can you pin on aggregate demand? Share this:FacebookEmail Filed Under: Economy, Federal, Politics · [...]
Tuesday ~ October 25th, 2011 at 12:57 pm
Tuesday links: purchase decisions | Abnormal Returns
[...] What are small business worried about these days? (Modeled Behavior) [...]
Tuesday ~ October 25th, 2011 at 3:36 pm
engineer27 (@engineer27)
Really, if those business owners had enough customers, they wouldn’t have any time left to worry about government regulations.
On the other hand, “The President is a guy I’d like to have a beer with” doesn’t seem much like a business plan.
Wednesday ~ November 2nd, 2011 at 10:08 pm
Regulation, Lack of Demand Biggest Concerns to Small Business - US Message Board - Political Discussion Forum
[...] [...]
Friday ~ May 3rd, 2013 at 4:17 pm
Cheap Nike LeBron 10 X Black White Red shoes
I like the helpful information you provide in your articles. I will bookmark your weblog and check again here frequently. I am quite certain I will learn many new stuff right here!