Wisdom from Arnold

by Russ Roberts on November 20, 2009

The narrative is more important than the facts. People like the narrative because it pleases them. Not because it’s true. Truth is elusive.

But evidence and facts do matter.

So when someone says the TARP was central to preventing disaster, don’t disagree. Don’t talk about how evil and anti-democratic it was to give the Secretary of the Treasury a $700 billion blank check with no accountability, a check he said he needed desperately and urgently because he needed to do x and then a week or so later, he did y. No, bring that up later. Instead, say the simple most important four words in the language of debate.

How do you know?

Simple. How do you know? What evidence do have for the claim? Always a good question.

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muirgeo

It's always a great question. It's the same one I ask when some one tries to tell me the superiority of unregulated markets or of a supposed libertarian society. How do you know?

Mark

Libertarian: "Liberty is superior"
Muirdope: "How do you know?"

???

Mike Laursen

The difference is that libertarians are proposing that some central authority "do something". We admit we don't know what's best for each individual, and so we don't advocate some grand policy.

For that reason, we don't need to answer, "How do you know?" We're proclaiming right up front, "We don't know."

Mike Laursen

"aren't proposing" ... sigh

Barbarossa

Anyone confirmed yet whether Muirgeo is a government agent?

Mark

Muirgeo is the devil. Oh - him and Paul Krugman.

Brian Garst

Reason and evidence. I'm sure any number of people here could give you a laundry list of books and articles detailing both of those, starting with the works of the namesake of this website.

Randy

Re; "libertarian society".

Just speaking for me, but I don't give a rat's nads about "society". I just imagine being free from the exploitation of the politicians. How do I know that would be a good thing? Well, I would be deciding for myself how to spend the 40% of what I create that they take from me. How do I know that I could make better choices for myself than they make for me? Confidence. Confidence in my own abilities. Confidence in the character of my neighbors. Confidence in the character of the productive class, and a complete lack of confidence in the character of the political class.

mesaeconoguy

From a pure ROI perspective, I have to ask, is Tim Geithner retarded?

I’m fairly certain the answer is yes.

Jon Najarian does the math in Barron’s:

Fast-forward to Oct. 21 of this year, and now Paulson's successor at Treasury, Timothy Geithner, is telling us what a great investment the government made in Goldman. His office touts the 23% return on our $5 billion in taxpayer money. Let's compare that with what we might have gotten with terms similar to Buffett's.

Goldman was trading at $115, so a $5 billion stake bought the taxpayers 43 million shares. With the stock subsequently running up to $180, that $5 billion stake would be worth $7.8 billion, a gain of $2.8 billion. But wait, it gets better -- or worse, depending on your view. Given the added kicker of warrants on another $5 billion, 8% under the market, we'd also own warrants for 43 million shares at $105. So we'd have made another $3.2 billion.

Thus, the total gain before dividends would be $6 billion on a $5 billion investment. Last time I checked, that's 120% on our money, versus the 23% that Hank got us. I didn't go to Dartmouth, as Secretaries Paulson and Geithner did, but I think Buffett got the better deal.

Duh.

[The World's Worst Trader?, Barron's, Monday, Nov. 16, 2009]

Andrew_M_Garland

We should ask loudly, how do our representatives know that their legislation will help, or solve anything? The legislative language is less important than the research that supposedly tells them that the legislation will be of good effect.

The Congress and Obama should proudly present their careful research that supports their proposed rearrangement of healthcare. Obama is a Harvard trained law professor. He should be up to it.

Where is the policy paper, Obama's/Congress's research on healthcare reform?

Seth

I think that's a good question.

Unfortunately, too many people think they do know and it usually sounds something like, "Well, I can't even imagine. The financial system would have collapsed. Things would have been much worse. Are you stupid enough to think we'd be as well off as we are now if we let these massive banks fail?"

And then they stop thinking about and go on about their busy lives.

jcuttance

you could answer I know because The Economist says so...
http://www.economist.com/opinion/displayStory.c...
and The Economist editors could say they know because the Secretary of the Treasury says so.

mcwop

According to TARP Inspector General Neil Barofsky, the IG discloses that the New York Federal Reserve did not believe that AIG's credit-default swap counterparties posed a systemic financial risk.

mjohns2

a great lesson passed down

McCloskey on "how do you know?":

Ask it of every paper you write and you'll get tenure; ask it of every paragraph and you'll become a distinguished economist; ask it, as Milton does, of every sentence you write and you can look forward to renting a tux or buying a gown for Stockholm in December.

http://www.deirdremccloskey.com/editorials/milt...

Randy

Along the same lines, the question, Why would you assume that?

By way of example, from Keynes' "General Theory of Employment";

If follows, therefore, that, if the consumption psychology of the community is such that they will choose to consume, e.g. nine-tenths of an increment of income, then the multiplier k is 10, and the total employment caused by (e.g.) increased public works will be ten times the primary employment provided by the public works themselves, assuming no reduction of investment in other directions."

So, why on earth should we assume that a massive redistribution of resources to public works would not reduce investment in other directions?

And since I'm on a roll, one more...

Unless the psychological propensities of the public are different from what we are supposing, we have here established the law that increased employment for investment must necessarily stimulate the industries producing for consumption and thus lead to a total increase of employment which is a multiple of the primary employment required by the investment itself.

1. Laws are not establish on the basis of suppositions.
2. "Public works" does not equal "investment".

Methinks1776

A check? I thought he wanted a bazooka in his pocket....which he wasn't going to use.

OnlyShawn

Incidentally, in Goldberg's Liberal Fascism book, he mentions the narrative and its power over people, a la Sorel...I'm not sure it's any more of a "liberal" thing than it is any other statist penchant, but seeing the roots of it is interesting.