Demanding Too Much of Unconventional Wisdom

We place very high demands on wisdom, ideas, or advice that bucks convention.  There is certainly some logic behind this, in that ideas widely held might be more likely to be useful, otherwise they wouldn’t be so popular.  Yet usefulness, longevity, and popularity certainly do not equal validity or truth.  An idea may be widely adopted because it is useful in making one less of a pariah, even if it is in fact false, or even evil.  The belief that bloodletting was the best cure for many illnesses was common.  So were beliefs in the necessity of slavery.

In other words, I think the logic that common ideas are more likely to be correct is only one small part of our reason for being less demanding of them compared to uncommon ideas.  Our desire to imitate others and be perceived as “normal” (even, sometimes, normal in misery) also drives us to demand far more of unconventional ideas than conventional ones.

One of the more popular demands made of unconventional ideas is that the believer in them must be rich, happy, and super successful.  If some unconventional idea about how to succeed in life is true, it goes, those who espouse it had better be rich and famous or else their lives are living testimony to the falsehood of their ideas.  Let’s just take an absurd example.  If you heard someone claim that planting all your dollar bills in the ground would cause them to grow into money trees you’d immediately look to see if this person was rich.  If not, you’d be ready to mock and dismiss the idea.

The unconventional idea of burying dollars in the ground is stupid for a lot of good reasons that are easy to discover.  But to argue against it because the person espousing it is not himself rich is not a very good reason or a sound approach.  Why not?  Let’s look at what would happen if we used the same standard to analyze conventional ideas.

It is widely accepted that eating healthy foods leads to a better life.  It’s common wisdom.  Again, whatever other good and bad arguments can be made to demonstrate the truth of this knowledge, one poor approach would be to demand that everyone making the claim themselves be fit and healthy.  If an overweight person claims that a healthy diet low in sugar is a key to health, most of us (wisely) do not dismiss it simply because the person does not exemplify the outcome they claim is likely.

There are several good reasons to not demand that the bearers of truth themselves exemplify it in order for us to believe.  Knowing and doing are two different things.  I may know full well that shooting 100 free throws a day will make me a good free throw shooter.  But I may not value free-throw percentages enough to make the necessary sacrifices to implement this bit of wisdom, even if I espouse it.  In addition to not having an intense enough desire to implement the idea given the costs involved, I may also have an upward limit on my own improvement.  No matter how many free-throws I shoot, I’m probably not going to be as good a shooter as Stephan Curry.  If I had lost both my arms in an accident, my free-throw shooting ability might be zero, yet that makes the piece of knowledge I hold about practice making one better no less true.

We overlook potentially powerful and valuable ideas when we dismiss (or accept) them based entirely on the lives lived by those who espouse them.  This is a poor standard of proof that would destroy all conventional wisdom if we applied it equally.  The life of the preacher doesn’t necessarily prove or disprove the validity of the sermon.  We’ve got to do more work and examine ideas for their logical validity, experimental validity in a wide variety of situations, and most of all their applicability and usefulness to our own lives.

Ask Where Things Come From

Yesterday, I came across this quote:

“America: Less than 5% of the world’s population, consumes over 25% of the world‟s resources.”

This is meant to shock and shame.  How selfish of the people living within this geographical area to consume so much!  That sentiment may be warranted if life were some kind of reality TV show with everyone stuck in a house with a fixed pool of resources, but it’s not.  If we really want to understand the world, we need to ask a key question: where do those resources come from?

They come from production and trade.  Everything that is consumed must first be produced.  There ain’t no such thing as a free lunch.  In order for people in the borders of America to consume stuff, they must obtain it.  They can produce it themselves or trade something else they have produced for it.  In a free market, every exchange is voluntary.  In order for both parties to agree to trade, both must consider themselves better off after than before.  Because economic value is subjective, both walk away wealthier than before because they gave up something they valued less than what they got.

Now that we know some basic economics, what does the statistic about consumption tell us?  It tells us that, in order to consume a lot, American’s must have produced a lot.  It means what they produce must be more valuable to their trading partners than what they consume.  In other words, it means they are creating value for the world.

There is an exception to the rule that more consumption happens after more value creation.  Consumption can also happen after resources are taken by force, outside the operations of the market.  This fact is illustrated by another quote I came across yesterday on a list of common economic fallacies.  The commenter said a common fallacy is,

“Not asking where ‘G’ comes from.”

In macroeconomics, wealth is often measured (somewhat dubiously) in GDP.  The typical formula for measuring a nation’s GDP is: C+I+G+(X-M).  In this equation, C means private consumption, I is investment, G is government spending, X is exports and M is imports.

There are plenty of problems with this formulation, but leaving those aside, the math tells you that increasing any of these addends increases total wealth.  This is what leads many to advocate for increased government spending as a way to grow the economy.  To the true believers, any spending will do.  John Maynard Keynes famously suggested that the Treasury should stuff jars with bank notes and bury them in abandoned coal mines to be dug up again.

But where does G come from?  Government produces nothing, it only takes.  Every penny in the G category was taken from C or I.  This would not seem problematic at first for the economy as a whole, much as individual taxpayers may not like it, because the sum would remain unchanged.  Except that, as we have been reminded, economic value is subjective.

A dollar taken from someone and spent on her behalf is less valuable to her than keeping that dollar.  If this were not so, she would have given it up voluntarily.  People put their resources to their highest valued use, according to their own scale of value.  Any time resources are taken by force, value is destroyed.  Further, the choices people would have made would send signals rippling through the economy, telling entrepreneurs and producers what to produce more and better of.  When government puts resources to their uses, it signals entrepreneurs and producers to create more of what government wants, which diverts production and innovation away from the areas most valued by the citizenry.

The common problem in both scenarios – assuming the a high rate of US consumption means less for everyone else; and assuming an increase in government consumption means more for everyone else – is a failure to examine causal connections.  Static snapshots of data – whether a percentage of world consumption or GDP – tell us nothing about the ongoing relationships in our world.

These relationships have patterns and feedback and adaptations.  The data comes from somewhere, and it’s more than a simple path; it’s the result of a complex and constant churning of causes producing effects.  Freezing this dynamic process in time and measuring where a bunch of stuff is can’t tell you whether the process is just or efficient, or what the results will be over time.

Before you make data-based judgments about systems in the world, understand where the data come from.  What does the process look like that produced it?  What are the causal relationships?  What happens to the data through time?  Citing a lot data might make you feel smart, but if you accept data alone as proof of cause, it’s only a feeling.

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