Saturday, January 19, 2008

What we don't know may kill us. Or not.

I'm glad John brought up the recession. It may actually have started already and we just don't know. Or it may never start, though the way things are going it's hard to imagine a big turnaround just around the corner.

The news topic of the week seems to be "what is the federal government going to do about the recession?" There will be much debate and perhaps some action, and later people will claim "this worked" and will be rebutted by "no, you're wrong, that worked." Meanwhile, many believe that congressional action can't work at all, and that these things are best left to the Federal Reserve, which can fix the problem more cleanly by simply cutting interest rates.

The funny thing about economics, though, is that no one really knows for sure what will work, or how quickly. Frankly, its status as a science can be a little on the murky side sometimes. It makes me sad because I really like economics, and I gravitate to the straight forward logic of (i) identify problem, (ii) find solution, (iii) implement solution, (iv) magic! But we have seen periods in which tax cuts were followed by economic growth and periods where tax increases were also followed by economic growth, as just one example. Go figure. Of course, that doesn't mean that nothing should be done. In fact, our quasi-ignorance probably means that a belt and suspenders approach is probably most appropriate.

But it's not just economics that's the problem. So many important public policy decisions are presented to us as clear imperatives (do this, don't do that)--war, health care, foreign aid, environmental issues--while meanwhile their vast ramifications are, more often than not, largely unknowable. I just wish we could all recognize how much we don't know, and that our civic leaders would consider more deeply what would happen if their plans for us, well, just didn't work out quite right.


Casey said...

Interesting point, Ethan. Sometimes our leaders don't realize that they could come across strongest when they admit what they don't know. Perhaps they don't because they don't want to be attacked by the opposition.. but a little true honesty might help them genuinely connect with the voters, learn a little more about the situation, and perhaps come up with a good place to start addressing the issues that may be causing this particular recession.

John R said...

I agree, “no one really knows for sure what will work, or how quickly.” And, as Casey said, it is sad that most leaders (in both the private and public sectors) would rather make a decisive and potentially incorrect decision instead of admitting that they don’t know…which, I assume, would be political suicide. And, I found clause (iv) of your straight forward logic hilarious… Magic!