Patterico's Pontifications

1/25/2013

We Don’t Know As Much As We Think We Do About the Economy, Part 1

Filed under: General — Patterico @ 11:08 pm

We all make the error of confidently saying that this or that governmental policy is certain to have this or that effect. But while studying history and economics is important, perhaps a little humility is in order.

I have told you that I am a fan of Russ Roberts’s Econ Talk podcast. Today I listened to one in which the guest questioned whether people can confidently use economic (and other social science) theory to confidently predict the effects on human behavior of changing certain variables. Do we truly know that a stimulus is going to increase GDP . . . or that it is not?

The hour-long podcast summarizes concepts in a denser and more complex book. I’m going to dumb it down even further and summarize three or four of the points the guest made that stuck in my head. I’ll do so over a series of posts, so let’s start with a single observation that is central to the guest’s thesis.

Essentially, the guest distinguished social sciences from hard sciences that give one the ability to make consistent non-obvious predictions about the future. One example he gave to make the point:

[I]magine you are the President of the United States and you are receiving, you are considering an Iranian nuclear weapons program, what to do about it.

And into the room walks your science advisor and she says: Look, if the Iranians take the following amount of physical material and combine it in this size and using this method, it will create an explosion big enough to blow up the city.

And next into the room comes an historian. And the historian says: Well, you know, if an attempt to subvert the Iranian nuclear weapons programs, my reading of the history of Iran is that the people will want this enough they will continue to replace, one way or another, the government until this happens. So it really is not a good idea to try and stop this.

And what I say is, no, even if this happens to be President Carter, trained as a nuclear engineer, even if you know nuclear physics, for the President to sit there and begin debating the empirically validated laws of physics with his physics advisor is kind of foolish. On the other hand, not debating the historian, not bringing in different historians of different points of view, talking to people who have lived in Iran, personal introspection about human motivations, would be equally foolish.

And so really you ought to treat the prediction made by the physicist very different from the one made by the historian. Both are very valuable. I would never advise taking action without listening to both those. People make lots of use of historian experts and non-historians make lots of useful predictions about this situation.

And then imagine, third, his economic advisor walks into the room. And she says: Well, you know, the CIA has a program to counterfeit currency in Iran. And this amount of currency will create this amount of inflation and unemployment. The question I pose is: Should you as the President treat the economist’s prediction more like the historian’s prediction or more like the physicist’s prediction? And what I say is: A lot more like the historian’s prediction.

Economics is not hard science like physics. It’s more like history. There are too many complex variables to make consistent predictions about exactly how changing one variable will affect the economy.

This, by the way, is why I tend to oppose any government intervention in the economy. There are so many documented examples of unintended side effects that I think it’s best to leave a complex system to the distributed intelligence of the nation and indeed the world, rather than trust a group of supposedly smart guys in a room with their hands on the financial levers. The more humility you have, the less apt you are to opt for the government solution.

The big government guys are the arrogant ones. We free marketeers believe in the market precisely because we don’t think we know everything.

UPDATE: It’s also worth noting, as I have noted many times, that capitalism is the only economic system fully compatible with freedom. My comments about supporting capitalism in this post are made in the context of discussing what economic system is most likely to work. But freedom is an independent reason for supporting capitalism. Everyone who regularly reads my blog understands this.

Friday Night Music

Filed under: General — Patterico @ 10:20 pm

It’s late, sure. But the kids are going to bed and it’s time to fire up some tunes. The first one needs no introduction. I thought I had shared this one with you guys, but if I did, I can’t find the post, so here you go:

Next up: a couple from a session with the Braun brothers, of Micky and the Motorcars and Reckless Kelly fame. You’ll see they’re from the same session. First is “Snowfall,” sung by Willy Braun, the lead singer of Reckless Kelly:

Then “Rock Springs to Cheyenne” sung by Micky Braun, lead singer of Micky and the Motorcars.

Enjoy.

The Media Is A Big Part of the Problem

Filed under: General — Patterico @ 10:03 pm

Ace says we must do something about the media.

The media no longer hides it in their actions. They are fully fused with the Obama Administration and DNC. The only way in which they do hide it is by simply lying when confronted about it: They’ll issue a snide denial, then go about doing precisely what it is they were accused of doing.

This is dangerous and unhealthy. I keep banging this drum but honestly, some patriotic billionaires do have to band together to purchase or build a media outlet. The outlet would be founded upon a simple premise: that it is dangerous and ultimately fatal for democracy for media power to fuse with government power, that the adversarial press is vital.

If we have any hope of fixing the horrible crisis we are facing, the electorate must be educated. But any time someone tries, Democrats howl that they are trying to kill old people and children, and the media joins right in.

Obama gave a partisan inauguration speech and they tried to tell you it was Lincolnesque. Hillary shrugged her shoulders at Benghazi lies and they told you that she had won. As Ace puts it, media’s power is perfectly fused with government’s power. “This is dark, and dangerous, and will lead to horrors. It always has lead to horrors before.”

As with most things, I don’t have the solution. I just know that diagnosing the problem is the first step. National Democrats and the media are the primary problem, because they are lying about the severity of the crisis.

We should all keep thinking about the solution, because it is important.

Glenn Reynolds says: “[G]o full Alinsky. Buy stock and show up at shareholder meetings. Protest at executives’ homes, like ACORN did for bankers. Hound correspondents and anchors by name for unfair coverage. That’s how you do it.”

I’m not sure that will solve the problem, but I don’t see how it would hurt. We certainly have no obligation to make it easy for them to lie to the public.

One thing is to identify the honest ones who don’t have a big head, and support them. I don’t always agree with Jake Tapper, but he’s willing to talk to people like Ace and me, and he’s willing to ask tough questions. You guys might not like to hear this, but Jan Crawford is one of the good ones and she deserves the support of honest people. Using allies — not ideological allies, necessary, but people who care about truth — is important. And also can’t hurt.

Breitbart always said the media was the biggest enemy. I’m not sure they’re the only one or the biggest one, but they’re right up there. Don’t ever forget it.

Obama “Recess” Appointments Unconstitutional

Filed under: General — Patterico @ 7:59 am

Because there was no “recess.”

Not odd to see this guy violating the Constitution. Just odd to see a court calling him on it.

Saxby Chambliss to Retire

Filed under: General — Patterico @ 7:49 am

The one guy in Congress who really seemed to care about holding the FBI’s feet to the fire on SWATting cases is not running for re-election.

Sigh.

Filibuster Reform Makes Liberals Mad

Filed under: General — Patterico @ 7:44 am

In essence, they wanted to take away Republicans’ right to filibuster, and it didn’t happen.

Aww.


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