The tagline of this blog is “exploring the limits of human knowledge,” and I realize that this means different things to different people. Most people when confronted with a tagline like that would assume that I’m claiming to be “pushing the envelope” as it were, or advancing knowledge past the limits of what we now know. However, what I actually mean by exploring the limits of human knowledge is that I’m more interested in learning what we don’t know and how our lack of knowledge affects the choices that we make, both on an individual level and collectively through public policy.
As it happens, my nom de plume is “Socrates”; this is not a coincidence. The oracle of Delphi, when asked to name the wisest person in the world, is known to have chosen Socrates, for he was the only one who knew how much he didn’t know. The level of arrogance, single-plane thinking, and unwarranted self-assuredness at all levels of society, but especially in the corridors of power, is absolutely staggering. It is that arrogance that creates the unintended consequences that are the subject of this blog. And it is that arrogance to which I refer when I say that I am exploring the limits of human knowledge.
Of course, I stand on the shoulders of those who come before me, and I am further grateful to those who do research in this area concurrently with my writing. One scholar in particular caught my eye today: Ricardo J. Caballero of MIT and NBER, who has submitted a working paper entitled “Macroeconomics after the Crisis: Time to Deal with the Pretense-of-Knowledge Syndrome.”
Read the abstract and you’ll get a sense of what I mean when speak of limits:
In this paper I argue that the current core of macroeconomics – by which I mainly mean the so-called dynamic stochastic general equilibrium approach – has become so mesmerized with its own internal logic that it has began to confuse the precision it has achieved about its own world with the precision that it has about the real one. This is dangerous for both methodological and policy reasons. On the methodology front, macroeconomic research has been in “fine-tuning” mode within the local-maximum of the dynamic stochastic general equilibrium world, when we should be in “broad-exploration” mode. We are too far from absolute truth to be so specialized and to make the kind of confident quantitative claims that often emerge from the core. On the policy front, this confused precision creates the illusion that a minor adjustment in the standard policy framework will prevent future crises, and by doing so it leaves us overly exposed to the new and unexpected.
I look forward to reading the paper in its final form.
Welcome to “The Solution is the Problem,” a blog that will cover many aspects of modern thought from several points of view. These will include the economic, political, philosophical, and legal.
You will find that posts are attacked in a variety of different ways, but they will end up in one (or more) of a discrete set of categories, which may change in the future. For now, those categories are:
The Solution is the Problem
Posts in this category will attempt to explain why proferred “solutions” so often fail not only to solve the root problem, but tend to create so many other problems themselves. This is a topic near and dear to my heart, because it seems irreversibly tied to human nature itself. As humans, we seem beholden to the idea that we can “fix” society, in the face of insurmountable evidence to the contrary. In perhaps the greatest irony of the human condition, the incorrect assumption that we can change human nature seems bound up within human nature.
Examples of this phenomenon are legion, and they range from the lighthearted and humorous to the universal and destructive. For example, it is demonstrably true that in many cases (though not all), raising taxes leads to declining revenue. Similarly, it seems odd that those states with the most “caring” approach to poverty seem to have the most intractable problems with homelessness. Perhaps it’s not surprising that our response to terrorism has involved nothing more than imposition of costs on travelers, without any corresponding increase in safety.
The Limitations of Human Ability
Bound up in the notion of human limitations is the concept of “praxeology,” borrowed from Austrian economics, which is the study of human action and motivation. While economists from the beginning of economic thought have attempted to aggregate human action, they have never come up with a model that allows for an accurate depiction of what makes people tick, nor will they ever devise a system to explain the innumerable interactions that form the social and economic order.
Political theory and commentary are rife with willful ignorance of the limitations of human understanding. Intellectuals everywhere would be wise to heed the Sibyl’s words about Socrates – he was the wisest man in the world because he knew how wise he wasn’t.
On the Outside Looking In
The inimitable Frederic Bastiat said that it is the bad economist who looks only at the effects which may be seen and ignores those that are unseen. Naturally, many social and political problems are the result of faulty thinking, which allows those people who already have what they need to ossify the social order and enrich themselves at the expense of those who do not currently have what they need. Unions, for example, purport to make the working class better off, and “on paper” higher wages for unskilled workers would seem to do just that. Bastiat, however, would warn us that the extra costs associated with an artificial price floor for labor keep those people who were not fortunate enough to already be in the union when the contract was negotiated from getting any work at all. In this way, many workers are left on the outside looking in.
An interesting corrolary is the curious case of the “masochistic rich.” Why are so many extremely wealthy people in active pursuit of the exact policies that would have prevented their accumulation of wealth in the first place? Perhaps they don’t mind that others are on the outside looking in, just so long as they’re warm and cozy indoors.
The Problem of Public Service
Young people are constantly exhorted to devote their lives to “public service,” meaning that they should join the bureaucracy. Yet it is not always in society’s best interest to have said bureaucracy imposed upon them. While it is certainly true that society functions better with impartial law enforcement and judges, there is no benefit to the public when a college graduate takes an entry-level position at, say, the USDA, whose sole purpose is to prop up inefficient practices, preclude consumers from making their own choices, and provide obscene pensions to those close to politicians.
It bears asking the question, who benefits from this type of “public service”? The only answer is the public servants themselves. The rest of society, as consumers, are demonstrably worse off. Compounding the problem is a lack of understanding of the simple fact that a system of mutual exchange means that private-sector labor offers a way to bring relative benefit to the people who consume the offered goods and services. If “public service” was actually public service, it certainly wouldn’t be so self-serving.
The Primacy of Society over Government
A fundamental understanding of a good political or economic theorist is that one cannot possibly have an understanding of every part of a working whole, perhaps best illustrated by Leonard Read in his seminal “I, Pencil.” There are literally millions of people working around the world in unknowing cooperation to bring you the milk you buy at the store. Nevertheless, the farmer, the farmhand, the delivery driver, the equipment maker, the construction foreman, the company executive, the cashier, the computer programmer, the credit card company employee, and you yourself were not ordered to cooperate. Cooperation is the natural order.
The problem, then, that many intellectuals run into is that attempting to synthesize or force cooperation is doomed to fail because it substitutes the interest of each of the millions of market actors involved for the whimsy of the “man in charge.” In the presence of fair and free exchange, imposition of government authority will be unproductive at best. Society orders itself spontaneously, and governments who upset that order are bound to disappoint their citizens.
Facts and Figures
While I am certainly no consequentialist, and I understand that utopia is unattainable, where the rubber meets the road, I believe my theories will have positive effects. It’s nice to be proven right once in a while.
I hope you enjoy the blog. Feel free to utilize the comments section.