Krugman: The argument from personal incredulity [View all]

[pampango]

I’ve written about this before, it turns out, but doing some of the media rounds I found myself thinking once again about a favorite phrase of Richard Dawkin’s: the “argument from personal incredulity”.

Dawkins uses it to refer to people who say “I just can’t believe that something as intricate as an eye can evolve through random changes.” The point, of course, is that our intuition has a hard time dealing both with the idea of selection and the sheer length of time evolution has to do its work, so your personal feeling that something isn’t plausible is a very bad guide.

In macroeconomics, the equivalent would be people who “just can’t believe” that borrowing more can help the economy, or that a fall in wages would actually reduce employment. What are they missing?

Mainly, I think, the closed-loop nature of macro. Our intuitions about how business-y stuff works come from businesses or households selling their goods or labor to an external market. In such situations spending less is a sure-fire way to reduce debt, cutting your price or your wage demand is a sure-fire way to sell more.

But in the economy as a whole, your spending is my income and vice versa; my wage matters only in comparison to your wage; and so on. This changes everything, which is why we have paradoxes of thrift and flexibility.

Of course, that’s why we do economic modeling: precisely to scope out the areas where personal incredulity is a very bad guide to affairs.

I get a lot of mail from people who are more or less blind with rage at the mere thought that anyone could say the things I do. I’m a witch-doctor, they cry; I must be deliberately lying; nobody could possibly believe the things I say. Actually, though, I’m just an economist who is willing to take it seriously when hard thinking suggests that the usual intuition is wrong under current conditions.

And the past few years have been a triumph for that kind of hard thinking! Lots of people declared that they “just couldn’t believe” that huge budget deficits wouldn’t drive up interest rates, that “printing” lots of money wouldn’t cause runaway inflation, that slashing government spending wouldn’t have a positive effect on confidence. We know how that has turned out.

http://krugman.blogs.nytimes.com/2012/05/05/the-incredulity-problem/

I guess we're all guilty at times of thinking that some policy we don't agree with "can't work" or "doesn't make sense" based on what we know and understand about the way the world works. Most of us (not republicans, of course ) are willing to reconsider what "can't work" when evidence shows that it does.

In Krugman's view the more complicated the issue (like how "something as intricate as an eye can evolve through random changes" or global warming or how deficit spending affects an economy) the more likely we are to discount facts and go with our gut feeling (or just ignore the facts and lie if one is a republican).