Just listened to four highly-credentialed economists (two to a side) debate the ultimate effects, social and economic, of the minimum wage. Each side made reference to studies that they claimed conclusively proved their case. One side argued so well the (what I believe to be) commonsense points I’ve expressed and linked to numerously over the years. Only to be shamed by the other for suggesting—commonsense (or empirical evidence) notwithstanding—that raising the cost of labor would somehow compromise the market for labor. Understanding that this was a publicized debate—the sides picked based on their advertised positions on the issue—and that, under no circumstance, would the discussion remotely sway a panelist from his or her conviction, I nonetheless found myself thinking wow, ideology is like Superglue. The resistance, through years of mining bias-confirming data, can become so great that to pry loose would mean to relinquish to the other side some psychic material that composes who we believe ourselves to be.
So I began to pen an essay on the subject then remembered that we already went there last fall. Give this one another read…
The Thing About Coffee – Or – Firm in His Addition – Or – Empirical Evidence is in the Eye of the Beholder
“The question we should ask”, says Paul Krugman in Friday’s NY Times, “is what policies would offer the best prospects for healing the damage?” The administration “would have tried to accelerate recovery by sustaining public spending and putting money in the hands of people likely to use it. Republicans, on the other hand, insist that the path to prosperity involves sharp cuts in government spending. And Republicans are dead wrong.” He goes on to cite the just-released IMF World Economic Outlook, a report that, he says, combines “short-term prediction with insightful economic analysis”. A “grim and disturbing document, telling us that the world economy is doing significantly worse than expected, with rising risks of global recession. But the report isn’t just downbeat; it contains a careful analysis of the reasons things are going so badly. And what this analysis concludes is that a disproportionate share of the bad news is coming from countries pursuing the kind of austerity policies Republicans want to impose on America”. He then confesses; “O.K., it doesn’t say that in so many words. What the report actually says is: “Activity over the past few years has disappointed more in economies with more aggressive fiscal consolidation plans.””
Fascinating that a man of Krugman’s intellect, and tenure as a political commentator, would suggest that today’s Republican politician—campaign pledges notwithstanding—is somehow less predisposed to spending than his predecessors. I see little, at this juncture, to support that assertion (look no further than their voting records).
The thing about coffee—for the infrequent user—is that the occasional cup will deliver that generally desirable kick. But when one finds oneself partaking on a daily basis, for an extended period of time, it, oddly, can deliver the opposite effect—sluggishness. Should the heavy user find himself in need of a boost (an approaching deadline perhaps)—if caffeine is to remain his stimulant of choice—he’ll have to step it up; go high-octane and maybe throw in a Red Bull or two. Knowing full-well he’ll be suffering the ultimate consequence—a major crash—once the deadline is met. But if he is to keep from destroying his health, crash he must.
From what I understand about alcohol (boring me doesn’t drink), the casual user gets by just fine on the occasional beer, glass of wine, etc. He enjoys the short-term effect, and his life is all about facing the everyday challenges that come with the typical modern human experience. The functioning alcoholic, on the other hand, feels miserable when that cup of coffee on his desk isn’t spiked with whatever it is he spikes that cup of coffee with. “Functioning alcoholic” is a term used for addicts who can hold down a job while simultaneously holding down their liquor. The term, however, is not to be confused with a “functioning liver”—and therein lies the problem. On the surface things may appear just great, while, inside, the abuser eventually drowns his organs and, alas, shortens his modern human experience.
Today’s politician (central planner) is, at best, the chronic caffeine addict. At worst, he’s the functioning alcoholic. He is forever haunted by his constituents’ query; “are we better off today than we were four years ago?” The notion of coming down off of years of over-spending, and suffering the healthy, market-clearing (and economy-saving) pain of recession—on his watch—doesn’t warrant the remotest consideration. And, sadly, as any user can attest, the greater the [stimulant-induced] sluggishness, the greater will be the cry for continued (and heightened) stimulus—particularly when the inevitable “crisis” (or garden-variety recession) occurs. And just like the in-denial addict who believes he can drink his way to success, the planner—whose mantra, a la J.M. Keynes, would be “in the long run we’re all dead”—assures us he’s got everything under control.
I find it utterly baffling how, in the face of the developed world’s record sluggishness and runaway deficits, Krugman remains firm in his conviction. Or is it that he’s firm stuck in his addiction? That would make sense—for addictions make blunderers out of otherwise bright individuals.
Now to be fair, he’s hardly the only hard-core addict Keynesian among us. They are aplenty, and they do indeed have their arguments, as market-advocates (like yours truly) have theirs. Each side offers up its empirical evidence—which the opposition refutes. The ardent Keynesian proffers a compelling—to the layman—exposé of how free-market-fanaticism put us in this pickle. His opponents, he accuses, are addicted to an out-dated ideology—and he has all the “empirical” evidence to prove it.
Thus, with both sides stuck as they are, when we step outside the spin—when we look at the world objectively—we conclude that ideology is indeed (I here confess) addicting, that the Keynesian vs Laissez-faire argument is eternal, and that empirical evidence is forever in the eye of the beholder.
May the following wisdom of Nassim Taleb inspire you to keep your wits about you. As for me, alas, I’m too far gone…
“Our ideas are sticky. And we tend to stick to our theories. Good idea then to delay ones theories, for once they’re made they’re very difficult to let go of.”
“Once your mind is inhabited with a certain view of the world, you’ll tend to only consider instances proving you to be right. Paradoxically, the more information you have, the more justified you’ll feel in your views.”