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Magical Thinking

• draw_down 10y ago
  Good grief.
• carsongross 10y ago
  The fonts make it nearly unreadable, but it's a good article, well worth reading through. Two thoughts: My hope for the alt-priest replacement is Steve Keen, who seems like the only guy with a reasonable explanation why orthodox economics is so consistently useless, and a concrete policy suggestion (modern debt jubilee). Which gets to my second thought: the current problem is not productivity growth and, in any event, productivity growth is a shibboleth (just pouring more gasoline in the engine and belching more exhaust into the sky produces more useless plastic tchotchkes, for God's sake). The current problem is debt. A very specific debt. It is the debt slavery being forced on our young people in the form of education debt and housing debt. It is crushing family formation, particularly among the most educated. No children, no future. Not with a bang but a whimper.
  • klipt 10y ago
    As sympathetic as I am to the idea that housing is too expensive etc., how exactly would you stop a debt jubilee from being gamed? If my mortgage is going to be forgiven, shouldn't I find the biggest, most expensive house possible, take out a huge mortgage to buy it, then wait for my mortgage to be forgiven / paid off by the jubilee?
    • fineline 10y ago
      Keene's suggestion is basically a flat universal payment, if you have debt it must be used to pay down debt first. http://www.debtdeflation.com/blogs/manifesto/ http://www.debtdeflation.com/blogs/manifesto/ I don't really get how it's supposed to work though. What would ensure it increased consumption and productive investment, rather than just further fuelling asset price inflation.
      • carsongross 10y ago
        It's supposed to work because Keene's models suggest it would work: the failure in the economy is not one of underproduction (we have dramatic overcapacity and, if anything, overproduction) but rather a lack of monetary power in the broader consumers hands, caused by the burden of private debt. It's unorthodox, but I buy it. Or, at least, I'd rather try his solution than keep trying the failed policies of both the orthodox and keynesians.
• TempleOS 10y ago
  The nigger brain cannot understand what a certified random number is. Frasier has a very low IQ.
• carapace 10y ago
  I really hope these massive systems we're building don't turn out to be our version of the stone gods of the Easter Islanders.
  • 0xdeadbeefbabe 10y ago
    Those are still around.
    • carapace 10y ago
      True, but the Islanders aren't. (Well, a few still are.)
• wbillingsley 10y ago
  We've entered an era where there is a not-so-quiet battle occurring within the system. This doesn't so much show through in "Trump" as in the criticisms of Trump, Brexit, the Australian push for a plebiscite on same-sex marriage, etc. Let's leave aside for the moment the question of whether any of the policies or people is right or wrong. It has recently become commonplace for elected officials to get away with arguing that they have a moral imperative not to listen, and not to give a greater opportunity for people to voice their views. Each of these topics is frequently decried not just as wrong but as "populism". The Australian plebiscite is opposed because a public debate might be harmful. A remarkable feature of Clinton's "deplorables" comment was that the focus just ended up on the number (is it really 20% of Americans that are deplorable?) not the inversion of the electoral relationship -- that the politician was casting her judgment on the electorate, rather than the electorate casting their unrestrained judgment on the politician. If you listen to Obama's speech at the University of Queensland before the Brisbane G20, though the audience applauded loudly when he talked about progressive measures, when he mentioned standing up for democracy in the region there was almost silence from the audience. We have reached a point where we would rather our governments disengage from the public than risk them hearing our opponents. We're not sure about standing up for democracy because, y'know, my neighbour might not agree with me on something that dammit they should be required to. And that is even though the two sides of politics are closer in policy than they used to be. Back in the 80s, it was nationalisation versus privatisation; unilateral disarmament vs mutually-assured-destruction. Now it's mostly about the tone of the debate, and rhetoric about emotive symbolic policies that aren't realistic (do you seriously think a wall would actually get built? or have any effect if it was?) And the trouble is, while here we are telling them to stop listening to those ignorant dissenters on one set of issues, somehow we mysteriously think they will listen to us when we dissent on other issues -- economics, trade, etc. We're building a system where we cannot influence economic policy because we're too busy telling the government "whatever you do, don't listen to people".
  • jpatokal 10y ago
    I'm aware of two primary reasons to oppose the plebiscite, neither of which aligns with your thesis: Supports of gay marriage oppose it because it's a foregone conclusion (most polls find a solid majority in favor of gay marriage), a hugely expensive exercise and non-binding to boot. Opponents of gay marriage oppose it because having rock solid data about the level of support would make "but won't somebody please think of the children!" type fearmongering harder. TBH, I'm not really sure why anybody even in government supports it, but that's Aussie politics for you.
• jtolmar 10y ago
  I found it kind of funny that the author's big conclusion was less state-directed action, leaning on the thought that somehow the economy will work out for everyone as long as we get out of its way well enough. A type of magical thinking. Unfortunately economics is split between an evidence-based field that occasionally changes its mind when its wrong, and a proliferation of "schools" and "think-tanks" that provide a selection of justifications to do what you already wanted to do. The science of how governments should handle money is too important not to be made into a political football.
  • acidbaseextract 10y ago
    I think his conclusion is more subtle than that. It's not that getting out of the way of the economy means it will all work out—far from it. Rather, continuing to buy into the magical thinking of the current priest-kings (i.e. state-directed action) opens the doors to much nastier alt-priests (e.g. totalitarianism). The specific process? Further buying into our current priest-kings puts pressure on them to make their magic work. Magical thinking eventually fails, inevitably. Then the historical process of succession of priests kicks in because "we need the eggs" (to use the article's phrasing), and the more we need the eggs, the more nasty the alt-priests we'll turn to in search of eggs.
    • throwaway729 10y ago
      > ... more subtle Subtlety != non-magical. Confusing subtlety and depth with rigorous thinking -- or even worse, scientific thinking -- is a common confusion people fall into when engaging with economic theory. Both professionally and as a side interest, both on the left and on the right. Existence of a large literature base, a big set of jargon, logically rigorous arguments, and mathematical models and theorems does not preclude fundamentally magical thinking. If you disagree, go read some Christian Apologetics. Portions of the field are more rigorous and have far more subtlety than most economics. But sorry, it's still fundamentally rooted in (literally) magical thinking. > priest-kings... alt-priests So we've replaced magical thinking with jargon-y name calling. Progress...?
      • 10y ago
• kawa 10y ago
  Interestingly the way the author understood the joke with the eggs doesn't speak to well of him: A human can't lay eggs, so the only sensible conclusion is that the deluded person isn't the brother who thinks that he is a chicken but the guy who thinks that a chicken is in fact his brother. So when he is using the joke to explain that we accept deluded behavior because "we need the eggs", it's in fact him who has a deluded way to think about the situation.
  • YeGoblynQueenne 10y ago
    >> the only sensible conclusion is that the deluded person isn't the brother who thinks that he is a chicken but the guy who thinks that a chicken is in fact his brother. That's one possible interpretation- another one is that both the man and his brother are delusional and the joke is absurdist (there are no eggs). That's the one espoused by the author.
• dandelion_lover 10y ago
  Related https://en.wikipedia.org/wiki/Magical_thinking https://en.wikipedia.org/wiki/Magical_thinking
• camperman 10y ago
  "Amazingly enough, the U.S. can still grow its way out of the massive debt we’ve taken on. I know … hard to believe. But it’s true. The power of compounding is truly inexorable, and it’s amazing what a steady 3.5% growth rate on a huge economic base can do to make manageable even trillions of dollars in debt." Oh, the irony. In an outstanding article about the dangers of magical thinking, the author slips into magical thinking. The power of compounding is indeed truly inexorable. It's also exponential. It doesn't matter how big the economic base is - a 3.5% compound growth rate will always be defeated by a 7% compound interest rate on borrowed money. Or a 5% one. Or even a 4% one. Always. It's just mathematics. The higher rate will always run away from the lower one. At a certain inevitable point, the unit time growth in the higher rate will exceed the growth of the lower rate. In economic terms, that's when all your output goes just to interest payments. That's not very manageable.
  • jbooth 10y ago
    3.5% would be defeated by 7%, that's right. What's the going-rate for US bonds again, right now? It's like 0.1%, right? And hasn't been above 3% since the early 80s, if I remember right?
    • beat 10y ago
      Someone made a really interesting point a while back, I don't remember who - that the economy needs deficit spending, because it creates those T-bills. They're the safe investment of last resort. Think of the triangle of risk/liquidity/return - US bonds are the lowest risk except for actual cash, with very high liquidity. If US Bonds fail, it's because the entire economy collapsed. The dollar would be worthless, the government no longer in control. If you don't trust stocks, real estate, gold, etc, then T-bills are for you. Take away the deficit spending, and you take away the safe haven for money to retreat when things start destabilizing in the higher-risk categories. So all the "magical thinking" economics that starts with the assumption that deficit spending is evil and we should have zero deficit? There are consequences beyond the taxpayers paying interest here.
      • 10y ago
• calpaterson 10y ago
  The trouble with "magical thinking" as it is used here is that it is simply a more pejorative way of saying "unjustified belief". Once you substitute the term "magical thinking" for "unjustified belief" the article becomes a lot more banal because really there are a lot of ways to be wrong and there is no particularly meaningful way to group all these ways together. Perhaps the central bankers do have unjustified beliefs about the efficacy of monetary policy. But there isn't a meaningful intellectual link - despite the considerable intellectual drippings of this article - between FOMC meetings and prehistorical tribal religion.
  • jonstewart 10y ago
    Quite. It's very effective at convincing that magical thinking/group think are a huge risk, but it's not at all convincing that the Fed is engaging in magical thinking. Ironically, it merely asserts it is so instead of engaging in the empiricism it clamors for. My first thought when I read: "Oh my god, are we really saying that the entire FOMC decision-making process comes down to whether there’s a good jobs report on Friday? Why don’t we just inspect the entrails of a goat?" was... well, incorporating a jobs report into the decision-making process, what's so wrong with that? I'm not a macro-economist and so perhaps I lack the background to critique this post effectively. But it just seems like more doom and gloom. The great thing about gloom and doom in finance is that eventually someone will be right and say "I told you so", but it's still usually just magical thinking, too.
• YeGoblynQueenne 10y ago
  Specifically, mathemagickal thinking.
• lintiness 10y ago
  there is NOTHING magical in thinking that managing global interest rates PREDICTABLY impacts economic behavior.
• Roboprog 10y ago
  I suppose 2 things would help * Raise taxes on the very rich, and use it to hire people to keep the commons in order. * Get lazy people to go back to school and study to do non-basket-weaving subjects to more efficiently make things that each other need, without sucking ever more raw materials. (I've had this talk with an adult child, but "I don't like school" - enjoy your minimum wage unproductive life, then) Yeah, we're screwed. Those suggestions are offensive to both parties now, I think: both the rich and the poor have to give something up.
  • 0xdeadbeefbabe 10y ago
    Uh aren't lazy people too lazy to be offended. Converting lazy people to not lazy people seems like the real problem.
• 0xdeadbeefbabe 10y ago
  Personally, I love being reminded that I'm not progressive and I haven't escaped the same old silliness of 1600 or 1500.
• rainhacker 10y ago
  Interesting read. But I don't get how the author's (or anyone else's) idea falls outside solipsism. His conclusion is also a product of his mind. Why is it not susceptible to be considered a magic spell ? > What I’m saying is that the old good magic of small-l liberalism and technological innovation in the service of man rather than the replacement of man is pretty darn powerful itself, and the stories still inspire