Monday, July 4, 2011

One More Stray Thought on Economics

Wouldn't it be nice if we could truly run an economic experiment on the various philosophies out there without paying huge consequences for being wrong?  With children, it's good to let them fail sometimes in order to learn the right lessons.  (One of my favorite coaching quotes is, "Pain is God's way of saying, 'not like that, dummy!'")  But I am unwilling to sit by and let my kids learn potentially fatal lessons the hard way.

Same thing with econ.  I believe in my principles--if I didn't, I'd change them.  But I'm willing to accept the possibility that I could be wrong.  How to test and find out, though?  Part of me would love to say, "Fine.  Let's try it your way."  And then when what I think are the inevitable results of bad math happen, my position would be vindicated.  (Or the reverse!)  Provided that we didn't wreck the whole Republic in the process, it might even be worth the pain.

However, the catch is that we pseudo-smart folks keep gaming the results.  "Yes, the economy was good under Clinton, but only because of the GOP congress."  "Bush caused the bottom to fall out of the economy.  NO!  It was Pelosi and Reid!"  "Yeah, the stimulus didn't stimulate anything, but it would have been even worse if we hadn't done it."  It's like dealing with conspiracy freaks (and I mean both sides).  Every single piece of evidence supports our own positions, including the ones that don't!

I guess the other big problem is that the true consequences of bad math take lots of time to play out.  Look at the whole housing bubble thing... it looked SO good from about 1995-2006, while the whole time the fuse was burning down.  


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