Friday, October 7, 2011

In Praise of Flip Flopping

Being wrong is one thing. I can't begrudge people of that. I've been colossally wrong. In fact I don't agree with everything I've written on this blog.

Suppose you advocated the invasion of Iraq based on fear of WMD and claims that the process would be easy. Also it would be welcomed by Iraqis. Suppose you advocated tax cuts and deregulated finance thinking that this was the best way to manage economic risk and improve the economic situation generally. How can people not look at the catastrophic failure that was our invasion of Iraq, or the catastrophic failure that was the 2008 economic collapse, and not at least modify some of their opinions? And how can they treat the very people that lead us to these catastrophes as if they continue to be good sources of insight? Take a look at some of Bill Kristol's economic insights prior to the economic collapse:
After the bursting of the dot-com bubble, followed by the attacks of Sept. 11, 2001, we've had more than five years of steady growth, low unemployment and a stock market recovery. Did this just happen? No. Bush pushed through the tax cuts of 2001 and especially 2003 by arguing that they would produce growth. His opponents predicted dire consequences. But the president was overwhelmingly right. Even the budget deficit, the most universally criticized consequence of the tax cuts, is coming down and is lower than it was when the 2003 supply-side tax cuts were passed.
His insights on foreign policy are similarly absurd in hindsight. But he's still treated with respect despite advocating policies, which were implemented thanks to his persuasive power, that have undoubtedly been so destructive.

I shared his views on the war and on Bush's tax policies. Following the collapse it was clear to me that I had been mistaken to trust people like Kristol, so I worked to try and make better sense of the data. Maybe Ron Paul understood the situation. I thought that for a while. Ron Paul expects things like runaway inflation. Seemed plausible.

Well, that's now also been put to the test. And as Paul Krugman explains here it seems pretty clear that Ron Paul is wrong. Maybe Krugman is right. Maybe the Keynsians are better at explaining things. That's what I tend to think now.

I might be wrong. I'm doing the best I can. I've been criticized for flip flopping. OK, maybe I do. But better to be a flip flopper than to be a person who's opinions are never shaken no matter what the evidence.


HispanicPundit said...

Be careful on the economics front. The history and presuppositions are a lot more relevant here.

Take Peter Schiff as an example. The guy even wrote a book before the crash predicting the crash. Based on this, you should follow his every word. But wait - dig deeper and you see that the guy has been doom and gloom for some time. In fact, his predictions as to WHY the crash would happen were wrong. More importantly, he has been wrong about future dangers (like inflation).

This is how many people see Krugman.

When the economy falls the people who look like prophets are those who have generally been doom and gloom. When the economy picks up, the opposite. To carefully track the RIGHT people, you have to account for the danger of confirmation bias.

This is why I stick to economic consensus - the more a school of thought proves to be right, the more it eventually moves the profession. That is my check against dogmatism.

Jon said...

That's exactly right. Ron Paul and Schiff are basically identical. They've been crowing about inflation and collapse forever. Being right about collapse appealed to me. Being wrong about the reasons and subsequent issues is what has since turned me off.

I think the consensus of the experts was that things like the derivatives market should remain unregulated. That was consensus in the 90's and 2000's and seems generally accepted today, but as Krugman frequently notices, this was not consensus in years past. Has the crash resulted in any reevaluation for you?