Teaching Ignorance

It ain’t ignorance causes so much trouble; it’s folks knowing so much that ain’t so. Josh Billings

Economics is important. So the world could use more of it. In the same sense, ignorance of economics is even more important. That is, the world could even more use a better understanding of how ignorant it is about economics. Let me explain.

Lately I’ve had a chance to see how folks like computer scientists, philosophers, futurists, and novelists think (in separate situations) when their work overlaps with areas where economists have great expertise. And what usually happens is that such folks just apply their ordinary intuitions on social behavior, without even noticing that they could ask or read economists to get more expert views. Which often leads them to make big avoidable mistakes, as these intuitions are often badly mistaken.

Yes, even folks who do realize that economists know more may not have the time to ask about or learn economics. But it seems that usually most people don’t even notice that they don’t know. Their subconscious quickly and naturally supplies them with subtly varying expectations on a wide range of social behaviors, and they don’t even notice that these intuitions might be wrong or incomplete. Which leads me to wonder: how do people ever realize that they don’t know physics, or accounting, or medicine?

Most people throw and move objects often, and have strong intuitions about such things. And if physics was only about such mechanics, I’d guess most people also wouldn’t realize that they don’t know physics. So it seems that a key is that “physics” is also associated with a bunch of big words and strange complex objects with which people don’t feel familiar. People hear words like “voltage” or “momentum”, or see inside cars or refrigerators, and they realize they don’t know what these words mean, or what how those devices work.

Similarly for accounting and medicine, I’d guess that it is a wide use and awareness of strange and complex accounting terms and calculations, and strange and complex medical devices and treatments, that suggest to people that there must be experts in those fields. And even in economics, when people realize that they don’t know where money comes from, or which of many possible auction designs is better, they do turn to economists to learn more.

Kids often learn early on of the existence of specialized knowledge, from the existence of specialized language and complex devices. Kids like to show off by finding excuses to use specialized words, and showing that they can do unusual things with complex devices. And then other kids learn to see the related areas as those with specialized expertise.

So I’d guess that what the world most needs on economics is to get more kids to show off by using specialized concepts like “diminishing returns” and complex devices like auctions. And then they need to hear that this same “economics” can be used to work out good way to do lots of social things, from buying and selling to voting to law to marriage. It is not so much that the world actually needs more kids using these concepts and devices. The important thing is to create a general impression that there are specialists for these topics.

The biggest obstacle to this plan, I’d guess, is that naive social science infuses too much of the rest of what kids are taught. Various history and “social studies” classes use naive social intuitions to explain major world events, and novels are read and discussed as if the naive social science they use is reasonable. Those who like using these things to push social agendas would object strongly to teaching instead that, e.g., you usually can’t figure out who are the bad guys in key historical events without complex economic analysis.

So the bottom line is that people don’t use enough econ because econ tends to conflict with the things people want to believe about the social world. Even teaching people that they are ignorant of econ conflicts, alas.

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  • http://juridicalcoherence.blogspot.com/ Stephen Diamond

    you usually can’t figure out who are the bad guys in key historical events without complex economic analysis.

    Link or cite to an application or development of this idea?

    A purely economic analysis of a complex conflict wouldn’t reveal the political implications (hence the economic implications based on the politics). Understanding the political implications requires, above all, historical knowledge and insight, and economists are typically weak on history.

    Perhaps the masses don’t respect economics because of its arrogant pretensions: such as of its carrying the principal insights relevant even to evaluating broad, symbolically laden conflicts. (Maybe telling people how “important” is economics is exactly the wrong p.r.)

    Concrete question: Who would economists say were the good guys in the American Revolution? (Bryan Caplan thinks it was the British.)

    • Austin Middleton

      “A purely economic analysis of a complex conflict wouldn’t reveal the political implications”

      “economists are typically weak on history.”

      These are flaws of the scientistic attitude of the mid-century economists and their intellectual progeny. I don’t think Hanson would disagree with you that economists as a profession have generally ignored public-sector political failures, or have discarded a study of history in favor of mathematical modeling.

      That being said, economists have been addressing these issues; they’re just not the mainstream.

      “Perhaps the masses don’t respect economics because of its arrogant pretensions”

      See Hayek’s Nobel acceptance speech “The Pretense of Knowledge”. The ignorance of the general population is matched by the ignorance of economists: neither knows what they don’t know. The question is why people seem to systematically admit (or be aware of) ignorance of some subjects like Physics, but not economics.

      “Who would economists say were the good guys in the American Revolution?”

      Perhaps I’m mistaken, but I doubt Hanson would categorize all agents of either side as good or bad; the virtuous and vicious can contend side by side. Bastards everywhere, eh?

      • http://juridicalcoherence.blogspot.com/ Stephen Diamond

        To the extent Hanson addresses these questions, it seems to me he does so the same way that Caplan addresses them: from the perspective of rationalizing an ideological pacifism. Caplan as much as admits he’s a pacifist, although he claims it as the result rather than source of his “economic” thinking on major complex conflicts, e.g. wars.

        (Hanson, for example, used responsibility for past warfare as the sole criterion for deciding who to vote for in various elections. That’s another kind of complex contest, one that’s perhaps easier to understand than war. Where’s the serious economic analysis?)

    • ThaomasH

      I guess he would point out the British error of abandoning their policy of benign neglect and actually trying to govern.

    • Weaver

      Durn rebellious colonials! Huzzah for the King!

      Seriously, both sides had a point. What would a “just compromise” have looked like?

  • vaniver

    Robin, I think you would be very interested in this video explanation of someone’s PhD research: http://www.youtube.com/watch?v=eVtCO84MDj8&t=1m27s (It’s only about 6 minutes long, and totally worth watching.)

    It’s about Newtonian physics vs. folk physics, but it would apply just as well to economics vs. folk economics.

  • spindritf

    This post could really use an example or three.

    • jhertzli

      The term “comparative advantage” in economics is easy to misunderstand. “American comparative advantage” sounds like it’s a matter of comparing American jobs to foreign jobs as a whole instead of comparing different specialties. (OTOH, if I got that wrong, it still illustrates my point.)

      In the case of physics, many people hear “depleted uranium” and think they know enough to determine it’s a weapon of mass destruction.

      In the case of chemistry, I’ve seen a claim that alkaline water will help supply oxygen because OH- ions have oxygen in them.

    • Scott H

      I was thinking the same thing as far as examples… and not examples from the hard sciences. Those are easy.

      Give me an example of someone misunderstanding comparative advantage in a way that has a real cost.

  • Peter St. Onge

    Very good arguments. People are too vested in economic questions to give us control. My brother, a chemist, used to complain he couldn’t talk about his work at dinner parties while economists are the life of the party (yes, compared to chemists probably true). So long as we do life-of-party work, we don’t get full grasp of the reins. I’ll take that trade-off, personally :)

  • http://misunderstoodfinance.blogspot.com/ Milton Recht

    Economics needs popularization in everyday language about everyday concerns through TV shows and other mass media similar to Psychology Today, NOVA, CSI, Scientific American, etc.

    It needs an effective organization that can get articles in newspapers, magazines and on TV on how policy is affecting the average person’s budget. For example, many politicians complain about high gasoline prices, but how many ever mention that federal taxes, highway trust taxes, state taxes, sales tax, etc. can add almost a dollar to the cost of a gallon of gasoline in high tax states. How many families would be upset if they knew states have laws to keep milk prices artificially high?

    MythBusters frequently will do shows about the correctness of the science in popular TV shows and common myths, especially explosions and survival. What popular media debunks the incorrect economics of many movies and TV shows?

    Economists rely too much on economically uneducated journalists to represent their profession to the public. Too often economists are called to speak about controversial issues, instead of the everyday concerns of the household.

    Every elementary school child deals with limited resource issues in school during recess, for teacher individual time, for playing a sport on a court or field, in the cafeteria, for limited school supplies, etc. Where are the education manuals and books to help teachers turn everyday common school events into economic lessons?

    • IMASBA

      “For example, many politicians complain about high gasoline prices, but how many ever mention that federal taxes, highway trust taxes, state taxes, sales tax, etc. can add almost a dollar to the cost of a gallon of gasoline in high tax states. How many families would be upset if they knew states have laws to keep milk prices artificially high?”

      Saying the US needs more economic libertarian punditry is like saying Egypt needs more sand. It might be more fruitful to teach people the oil price is global and that global consumption is so large that no single extra source of oil would make a dent in the oil price (speculators cause bigger spikes and drops).

      • Weaver

        If no single source can affect the price, why are we all so worried about Straits of Hormuz?

      • IMASBA

        Because there’s more than one (actually a whole lot more than one) source in the area…

      • Weaver

        Obviously :-)

        I was trying to hint at the agglomeration error….the term “single source” is underdefined. A well? A basin? A country? A region?

      • IMASBA

        The kind of sources that usually feature in American “debates”, like the deep sea oil fields in the American part of the Gulf of Mexico.

    • Christian Kleineidam

      State make money through taxation. That shouldn’t be news to people.

      Taxing gasoline is just part of it. It’s even relatively clever because we want people to make choice that burn less gasoline and therefore produce less CO2 emissions.

  • Chris G

    I came to economics from the hard sciences and, uh, I think you’re being somewhat myopic. Economics is grossly hindered by tradition, oversimplified models, bad science, political and cultural biases…so claiming that you’re giving, I don’t know, anthropology a run for it’s money isn’t setting the bar real high. I can barely imagine a science more in need of a rigorous overhaul (well, human nutrition, maybe). And the hubris…you guys are pretty poor at understanding social context or even basic ethical principles. I would definitely argue a need to limit economists’ influence in the public sphere because of the damage already done, let alone what else you guys might come up with. Sure, I think economics can cast a different light on certain matters, but it’s not a science; it’s more like a technocratic priesthood. If I would trust anybody to make large decisions, I’d trust engineers over anybody. Economists scare me quite a bit.

    • IMASBA

      “it’s not a science; it’s more like a technocratic priesthood.”

      I’m going to remember that one!

      And yeah, ask 1000 economists about something and you get 1000 different answers so beyond some very basic concepts that every self-respecting intellectual should know anyway (though of course there are many that don’t) I’m entirely unconvinced that computer scientists, futurists, novelists, etc… are missing out a lot by not consulting economists.

      • Chris G

        Professional cultures self-select for certain attributes and personality traits. That’s kinda normal, to a degree. But with economists (and other faith-based groups) you’ll notice behavioural changes to conform to the group standards and belief systems…they try to fit their own models. That’s always going to happen to an extent, but when they try to impose those standards on other people…that’s a religious calling. The problem with economists then is that they lack the ethical restraints of more established professions that limit their own potential for damage through codes of conduct and so on…and on the whole, they’ve behaved pretty badly in this respect. The twentieth century is littered with the aftermath of this kind of hubristic over-confidence…literally *every* profession claims that everybody else should listen to them more.

      • HM

        “ask 1000 economists about something and you get 1000 different answers”. Is this true? Check out the IGM poll of famous economists at http://www.igmchicago.org/igm-economic-experts-panel/. There is very large agreement on a large number of fairly specific policy questions.

    • oldoddjobs

      It’s the political biases which stand out most for me, rather than the tradition, models etc

      The inherently interventionist nature of macroeconomics, for example. This is not to say I’m pro/anti intervention – but the “court intellectual” milieu of the econ profession is the most glaring hindrance to a mass appreciation of economic “science”. To an outsider it appears that macro is just state-sponsored voodoo. They can say anything, come up with any old theory, and if enough of their peers reckon it’s clever -hey presto!- we’re doing economics!

      (with your money)

    • Anonymous

      Hm, fairly unspecific criticism for a post with 6 upvotes. Some examples could have helped.

      I could copy and paste most of this for psychology or sociology, with only minor modifications.

      • Chris G

        I agree (with both criticisms, but I’m just a commenter here; you want me to cite references?) I think a lot of fields want the authority of science, so they adopt a patina of scientific authority (the religious paraphernalia – graphs and charts, lab coats and so on). In economics, the maths is often used just to obfuscate or win arguments – in other words, for its rhetorical value rather than for explanatory or exploratory purpose. Simple models are useful for heuristics, but not for prediction, and that’s where it all falls down.

        I don’t think there’s much of interest being done in economics by white American men. There are too many vested interests and the biases are too deep and too opaque and too buried in spurious, self-serving ‘rationality’. I’m often reminded of the Fritz Leiber’s old novel ‘Gather, Darkness!’, which is as good a parable of technocratic hubris as any.

    • Weaver

      Many engineers have limited understanding of cost-effectiveness, opportunity cost, marginal costs or any strategic problem as opposed to merely decision problem. Doubly so if the problem is outside their own speciality.

      I work with them all the time and they make brilliant things which are terrible allocations of resources.

  • Adrian Gonzalez

    The reasoning behind all of this is overly simplistic. I would think Econ wouldn’t always conflict with the things people want to believe about the social world – I’d think that some Econ would very much complement those same things. We’ll define what these “things” are some other time, I guess.

    Anyways – without data, you are just another person with an opinion, said a famous Statistician.

    Nice opinion. Somewhat insightful ;)

    Cheers

    • oldoddjobs

      The reasoning behind your post is overly simplistic, sorry.

      • Adrian Gonzalez

        Case in point.

    • AmagicalFishy

      The only data he would need is something showing that economics, as a science, is correct more often than human intuition is correct, and is more verifiable than human intuition is—thus showing that being less ignorant of economics and more skeptical of human intuition is a good thing to do. Then, according to you, he would cease to be “another person with an opinion.” (Is this data you really need to see outside of actually reading some economics-related literature?)

      If you’re genuinely questioning the validity of the data upon which this post is based, then do some simple economics-related reading.

      If you’re *not* questioning the validity of the data upon which this post is based, then your response is… well… irrelevant.

      I can assure you, the necessary data is available in such easily accessible, voluminous amounts, that mentioning it would have been totally excessive–especially in a website where the field of economics already plays a huge role.

      My suspicion is that you didn’t think your post through, and used the quote only to justify a gut (might I say: intuitive) feeling of “I don’t want to believe this!”

  • slocum

    “Which often leads them to make big avoidable mistakes, as these intuitions are often badly mistaken.”

    I, too, would like to see some specific examples. And I’ll be interested to see if they’re mistakes that result from value-neutral folk theories or are politically driven because, of course, economic beliefs (folk and expert both) are much more likely to have a political basis than physics beliefs.

  • Jayson Virissimo

    “It is no crime to be ignorant of economics, which
    is, after all, a specialized discipline and one that most people
    consider to be a ‘dismal science.’ But it is totally irresponsible to
    have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.”

    — Murray N. Rothbard

    • a_____z

      Kind of ironic, given that Rothbard had loud, vociferous, ignorant opinions about economics himself.

  • Scott

    > Yes, even folks who do realize that economists know more may not have the time to ask about or learn economics.

    This may be a problem of ignorance about the domain of economics. Anecdotally, I used to think that economists were basically people who did accounting for governments. Had I known going into college that economics was essentially an applied study of human behavior, I might have pursued a degree.

  • http://priorprobability.com/ F.E. Guerra-Pujol (Enrique)

    The point about ignorance is well-taken … but is economics (especially macro) really all that great? (Cf. Chapter 1 of “The Signal and the Noise”.) Moreover, don’t economists have the same cognitive biases and political prejudices that all people do? Thanks, but no thanks … I’ll just stick with my Humean intuitions, updating my priors when warranted

  • Ragout

    People don’t realize that they don’t know medicine! Look at all the anti-vaccine people, the homeopaths, the naturopaths, the faith healers, and so on. These people are just as arrogant and ignorant as self-taught “economists” who think that inflation is currently above 10%, that cutting deficits is a good way to fight a recession, that productivity growth and free trade cost jobs, and other nonsense.

    • IMASBA

      “People don’t realize that they don’t know medicine! Look at all the anti-vaccine people, the homeopaths, the naturopaths, the faith healers, and so on.”

      I disagree. People are fully aware that these things go against medical science (or that even when they do work the theories behind them are not scientific). People just don’t trust medical science because it’s big business (and to be fair big business and sloppy research do mean many medicines do not actually work or work as well as advertised, it’s just that there is no conspiracy the other way around to suppress knowledge of the working of homeopathy etc… and that’s where the people you mention become conspiracy nuts).

      “These people are just as arrogant and ignorant as self-taught “economists” who think that inflation is currently above 10%, that cutting deficits is a good way to fight a recession, that productivity growth and free trade cost jobs, and other nonsense.”

      It’s also people who think economics offers one size fits all answers as if they were laws of physics that are fooled. Cutting the import of foreign weapons is a way to cut your deficit without adverse effects on your economy, while stimulus without reforms to increase productivity will not cause significant long term growth, also free trade can most certainly cost jobs in the short and medium terms (and the medium term can be half a person’s working lifetime) for at least one of the parties involved when the market value of the labor falls below the minimum wage in a richer country for example. Economic “laws” almost always come with conditions, assumptions and exceptions.

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  • Lex Spoon

    You give examples like diminishing returns and auctions. Unfortunately, when people hear “economics”, they think of macroeconomics, which is what’s in the press.

    I suspect the problem you are running into is more about branding than about real respect for expertise. Macroeconomics simply has not proven itself any better than faith crystals. On the other hand, the analytic methods you describe are extremely popular and are taught in MBA programs.

  • arch1

    To the extent that economics makes surprising corrections to common intuitions about human behavior, these can be communicated via various entertaining demonstrations / experiments, starting even with very young children.

    There are lots of forms this might take – classroom surveys, viewing videos, thought experiments, etc.

    Two examples: 1) I found the thought experiments concerning decision-making in Daniel Kahneman’s book ‘Thinking, Fast & Slow’ fascinating, especially those I fell for. 2) The well known basketball/focus-of-attention clip shows how indelibly a short video can correct common intuitions in the area of human perception (this example strays beyond economics, but that is beside the point).

  • Ely Spears

    My personal experience is very different than the advice of this post might indicate. For instance, after coming to the asset management business from computer science, I was shocked at the poor statistical inference practices I saw. Everything is based on t-statistics and arbitrary cut-offs for significance. Many models are evaluated and chosen using only “first principles” and econ intuition. And there’s an open culture about the fact that this intuitive style that lacks rigor is clearly bad, clearly suboptimal, clearly could be improved with minimal effort, clearly not cost effective. But incentive schemes make it very lucrative for those who can wheel and deal in the low-quality inference jargon, who can data mine for significance but put spin and marketing on it to appear very credible. I’ve seen many successful modeling techniques from Bayesian inference and machine learning just tossed aside, almost laughably, because how would anyone ever explain the “first principles” or “intuitive” reason why it did not work in some period?

    I may only have limited exposure, but my take away has been this: economics seems to be a special case of a signal processing problem, and the modeling motivations that underlie much of the math and computer science literature on signal processing, statistical learning, and Bayesian inference seem to utterly subsume and supersede any of the econ or market first principles that are widely trumped up. But those are not as easy to sell as simplistic stories about overreaction/underreaction, micro to macro aggregation stories, etc., so they collect dust on the shelf despite being more accurate tools with strictly better info about what they seek to model.

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