Thursday, March 14, 2013

Self-serving Bias

Paul Krugman wrote an op-ed last week about the booming stock market. As you may have noticed, the DJIA has been on a hot streak for the past week and a half, setting new records each day in what has been seen as a clear indication that things are getting much, much better. That, at least, has been the opinion of many well-respected economists and politicians.

As Krugman points out, though, making vague assertions about the state of our economy based on the stock market is not good economics, or even good logic. In fact, he says, you need only look at the stagnant wages, stubborn unemployment, and fantastical corporate profits to see just where all the growth is happening. And that's nothing new.

Krugman's article is particularly great because he points out a phenomenon that I've been frustrated about for some time. It's the tendency of academics, pundits, and politicians to propose ideas, and then take available evidence as validation for them. Krugman's point, and my complaint, is that this happens all the time, and it leads to shoddy reporting, bad science, poor logic, and eventually failed policy.

A great example that I know of is the issue of Glenn Beck, who has been spouting for years about the approaching hyper-inflation, and the need to go back to the gold standard. It's a self-serving idea, and Beck takes every up-tick in inflation as a sign that it's coming.....riiiggghtt......abbbbboooooouuuuuttttt........

Except it hasn't come. It's been five or more years, and it still hasn't happened. Beck argues that he's good at predicting what will happen, not when it will happen. That's a genius excuse, because it gives him an unlimited amount of time to be proven right. If we experience hyper-inflation at any time in the next few decades, you can bet Glenn will be tooting his own horn about how he was right all along. He was just many, many years ahead of his time.

Krugman has several examples of this self-serving issue, and how many people get caught up in these things. It's like the people who see the face of Jesus in their Cheerios. Has an Atheist ever seen Jesus in their Cheerios? No, because Athiests aren't expecting to find it. Until our greatest minds stop trying to prove how great they really are by being right all the time, maybe we should stop listening to them so closely when they try to tell us they know exactly what's going on.

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