Thinking Clearly

by Don Boudreaux on October 29, 2008

in Myths and Fallacies

My friend, and my former teacher at NYU, Mario Rizzo read this recent post and sent to me the following quotations from Herbert Spencer:

From Chapter 28 of Vol. 2 of Spencer’s Principles of Ethics:

Evidence thrust before us every morning shows throughout the body politic a fructifying causation so involved that not even the highest intelligence can anticipate the aggregate effects. The practical politician so-called, who thinks that the influences of his measure are to be shut up within the limits of the field he contemplates, is one of the wildest of theorists.

From Sec. 2.14 of “The Coming Slavery” in The Man versus the State:

The incident is recalled to me on contemplating the ideas of the so-called “practical” politician, into whose mind there enters no thought of such a thing as political momentum, still less of a political momentum which, instead of diminishing or remaining constant, increases. The theory on which he daily proceeds is that the change caused by his measure will stop where he intends it to stop. He contemplates intently the things his act will achieve, but thinks little of the remoter issues of the movement his act sets up, and still less its collateral issues.

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{ 8 comments }

Hammer October 29, 2008 at 1:30 pm

Good post. I recall making a similar point once long ago in a philosophy course, and being told that it was a slippery slope argument and thus invalid. It is good to see that someone else has recognized that when going from "absolutely nothing" to "a little bit," the definition of "a little bit" tends to change over time, and is at the mercy of those doing the defining.

Dagon October 29, 2008 at 5:38 pm

I had not run across it before, but my new favorite phrase is "fructifying causation".

At first glance, it would seem to mean "choices that get results" – that is, intentional causal behavior that bears fruit.

Spencer seems to mean instead a concept that became popular a century later: fractal complexity. Effects are causes, in a tight enough loop that outcomes are "computationally infeasible" to model.

I'm in full agreement. This seems a key point to anyone who's tempted to deny the liklihood of unintended consequences.

Mario Rizzo October 29, 2008 at 6:08 pm

Thanks to Don for posting these quotations. I have for a long time thought that Herbert Spencer is under-appreciated today and is well-worth reading. Much of his analysis is still quite relevant. I wrote an article years ago about his "slippery slope" ideas entitled, "The Coming Slavery" after an article by Spencer by the same name.

Martin Brock October 30, 2008 at 12:15 pm

Half of bailout of major banks flows through to shareholders

And the rationale for this payout? Apparently, if the Treasury wouldn't let the banks pay out half of the cash in dividends, the banks wouldn't accept it.

Which makes you wonder why the Treasury doesn't just return the cash to taxpayers rather than redistribute it to band shareholders … except that taxpayers aren't really providing it. The bankers themselves are creating the cash to hand it to bank shareholders.

If you know the banks will be paying these dividends for the next few years, with this newly created cash, you'll buy their shares, and if you buy their shares, the share price rises, and if the share price rises, the executives deciding to take the cash get to cash in their options. Everybody wins. Right?

So maybe the Treasury could hand out cash to banks that aren't failing only if they'll extend loans expecting to profit? No. That's too simple, and the Discount Window already offers this deal anyway. They tried it already.

So the shit's hitting the fan. What can we do? Hell, let's just hand out money to rich people and call it "capitalism". They'll know what to do, and if they can't produce anything with it, at least they'll have something to eat when prices double for the rest of us.

Socialism for the capitalists? Yeah. That's basically what it is.

Sam Grove October 30, 2008 at 2:15 pm

The Is Obama a socialist post is no longer accepting entries, so:

We should acknowledge all the things that "socialism" has brought us.

Empire

bailouts

agribusiness subsidies

industry protection

monopolies

full prisons

more prisons to fill

high schools that produce graduates requiring remedial courses in college

drug prohibition crime

federalized banking industry

piles of expensive junk on the moon

Department of Homeland Security

etc.

djaces October 30, 2008 at 6:58 pm

Politicians may not have invented the law of unintended consequences but they have surely raised its' application to a high art. Virtually every "crisis" we now are faced with is a consequence of some high minded politician's effort to "fix" a previous "crisis" created by his own or others' attempts to "fix" some other "crisis" created by…….ad infinitum.
Unfortunately, thanks to Obama and his pal Mr. Ayers, our educational system is now completely suffused by the notion that none of us can survive, let alone prosper, without the government stepping in to fix any and all problems that might possibly arise at any time in our lives. What is required is a educational revolution so that no child or adolescent can be released from school until he has demonstrated a firm grasp of a few simple concepts,
1] The government never pays for anything. [taxpayers do]

2[ Insurance companies never pay for anything. [policy holders do]

3] Corporations don't pay taxes, they collect them.

4] Politicians can't "fix: anything.
4a] When they try they always make things worse.

5] The best promise we can extract from any politician is that he will got out of our way and stay out of our way as we do our best live our lives.

If we can give young people a firm understanding of these truths, along with the ability read at a high level, write and speak their ideas clearly and concisely, sufficient knowledge of math, especially statistics, logic, argumentation and techniques of manipulation to evaluate the sea of "information" they will be exposed to throughout their lives, we will have armed them skills sufficient to allow them to achieve whatever dreams may possess them and hopefully garuanteed the survival of the Great American Experiment of a free people living in a free society

Sam Grove October 30, 2008 at 7:32 pm

I'll add another to your list.

5. Government licensed teachers are not required for learning.

Sam Grove October 31, 2008 at 2:27 pm

Methinks,

I think this confusion stems from you lack of understanding of what finance is. … Finance is a branch of economics – it is applied economics and it is the practice of providing liquidity, which is another way of saying "facilitating resource allocation".

But I do understand that. I think this confusion comes from your assumption that I don't. And blast this blog for eating my previous attempt to post.

You said "facilitating resource allocation".

Where do the resources come from?

Savings and investment. Yes?

Savings and investments arise from our production in excess of our consumption, credits counted in dollars, that is, forgone consumption.

Finance: my definition:

We place those credits into interest bearing or speculative accounts with the promise or hope that they will return to us increased in value.

Finance. Your definition fits in here.

Application of capital to production.

The future: We receive our increased value credits with which we may purchase product for consumption.

My rephrased statement was eaten by the blog software, so here it is again:

Finance is about how consumers gain the right to consume, in the future when they are no longer producers, what is produced by producers in the future.

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