Scott once again scoffs in the face of common sense economics:
Common sense is almost useless in the field of economics. Never dismiss
an economic theory because the assumptions about human behavior don’t
sound plausible.
Notice, though, how Scott tries to persuade you of this conclusion: By methodically making an economic theory’s assumptions about human behavior sound plausible! And he does a nice job, too:
[People] don’t find it plausible that people would save more if the
budget deficit increased, and indeed they are even skeptical that the
public would be aware of the fact that the deficit increased.If I ask my students whether they find RE to be plausible, they almost all answer “no.”
But suppose I ask them a different set of questions:
1. Do you expect to get back all the Social Security that you have been promised?
Almost all say they expect less than what has been promised.
2. Then I ask whether that perception affects their willingness to save money for retirement, outside of Social Security.
Almost all say they are more likely to save for their retirement
because of the perception that Social Security is on the road to
bankruptcy.But if you put these two answers together then you have Ricardian Equivalence!
If Scott really put no weight on plausibility, he would scorn his own Socratic efforts. What’s the point of reconciling economic theory with common sense if common sense is “almost useless in the field of economics”? All you’ve shown is that economic theory is consistent with something of no particular importance.
My point: We should heed Scott the educator, not Scott the methodologist. Common sense is the foundation of all reasoning. If you want to reject a common-sense claim, you’d better do it in the name of an even stronger common-sense claim.
Quantum mechanics, for example, ultimately rests on the core common-sense belief that repeated careful observation reveals the world as it really is. So does every other scientific claim; none build on the slogan, “Who are you going to believe – me or your own eyes?” If an economic theory seems to contradict common sense, decrying common sense just makes you sound dogmatic and senseless. The sensible response is to show that the alleged contradiction is illusory. Don’t tell me you can’t show this. It’s easy if you try!
READER COMMENTS
Kevin Erdmann
Aug 6 2014 at 1:59am
Instead of common sense, the problem is that people want to think in terms of narratives, and narratives can be very unhelpful about thinking on the margin.
vlade
Aug 6 2014 at 5:15am
Err, no? Common sense and observation of universe aren’t the same thing. If they were, we wouldn’t have so many myths that the observation discredits.
foosion
Aug 6 2014 at 5:51am
Common sense is much too prone to personal prejudice to be a useful foundation for anything purporting to be scientific.
For example, common sense told many that interest rates and inflation would soar following the Fed’s efforts to fight the 2008 recession. Others had the opposite reaction. Which really represents common sense?
The statement about quantum mechanics and common sense is just silly.
genauer
Aug 6 2014 at 7:15am
following foosion,
“The statement about quantum mechanics and common sense is [NOT] just silly.”
It is the intellectual bankruptcy of the guy who wrote it.
Quantum mechanics is all about something absolutely not working like common sense
Greg Heslop
Aug 6 2014 at 7:24am
I agree that common sense is “the foundation of all reasoning”, and it should be used again and again to gain insight and eliminate error. For instance, common sense tells me that people are better off if they are paid more, so it is commonsensical that the minimum wage is good at alleviating poverty. But if I use my common sense again, it also tells me that not everyone’s labour is worth as much or more than the minimum wage. This tells me that the minimum wage leads to unemployment.
The late Gary Becker also used to speak highly of common sense. People would occasionally tell him not to take offence that they thought his ideas were “just” common sense, but he invariably took it as great praise, for he thought economics was about the consistent application of common sense.
Handle
Aug 6 2014 at 11:56am
The problem is to try and avoid patterns of argument which have no limit in principle to the kinds of statements they can justify or criticize and will thus admit of no possible defense or refutation.
For example, whenever the implications of the logic of utilitarianism can be shown to lead to morally disturbing hypothetical situations, Sumner can always reply, “Our instincts and intuitions were designed by evolution and won’t always line up with utilitarianism.”
But then when asked why we should be utilitarian, he uses arguments which depend on some level on appeals to instincts, intuition, and common sense.
The point is that there is no way to defend against any argument which advocates the adoption of some standard, and has a way to reject any demonstration of the undesirability of the consequences of that adoption.
Scott Sumner
Aug 6 2014 at 12:59pm
Maybe instead of common sense I should have said “Our initial instincts when presented with an issue the way it is usually framed by both economists and non-economists.”
Brian Albrecht
Aug 6 2014 at 2:12pm
I have always thought of quantum mechanics as something that is counter-intuitive. Something can be a wave and a particle?
You’re right though. We always need to frame these ideas in ways that make more sense to us. We can’t easily think in terms of particle existing over a probability distribution, so we think of it like you explain. That doesn’t make it common-sense.
I do agree that economics is somewhat common-sense. But it is common-sense taken to its logical conclusion, which is not common for people at all.
Mark V Anderson
Aug 6 2014 at 9:50pm
I agree with Bryan, that common sense is what we should appeal to. Although maybe that should be amended to common logic. Some might consider their unthinking prejudices to be common sense, but if they are willing to think about an issue, most folks can follow the logic. As Greg states, one’s initial logic might be wrong, but common logic will come closer to the truth if one continues to be open to logic.
bof
Aug 12 2014 at 2:32am
You have to be careful not to confuse everyday common sense and critical common sense.
Everyday common sense uses the tools of critical common sense in a fuzzy and simplified way and incorporates opinions, prejudiced beliefs, “truths that every body know” and which are no longer discussed until a “new thruth” appears very slowly.
Critical common sense uses rational thinking with rational logic. Not “other logics”.
It is the point of departure for scientific thinking when you examine the validity of hypotheses (“earth is flat” for example).
It requires drastic conditions : “ceteris paribus”, reproducibility, independent variables, or the statistical study of a great number of homogeneous events, from which you can infer/generalize a reasonably large validity domain where you can act according to these findings, while hoping that a black swan won’t intrude from outside.
Jason Smith
Aug 15 2014 at 2:25pm
A different interpretation of Scott’s evidence that respects our “core” common sense view that humans are irrational or economic forces are counterintuitive is that the forces aren’t due to rational human decision-making. The invisible hand is the result of entropic forces that are independent of our rationality or lack thereof:
http://informationtransfereconomics.blogspot.com/2014/08/rationality-and-entropic-forces.html
Matt
Aug 16 2014 at 5:36pm
I think you are trying to have it both ways when you say “Quantum mechanics, for example, ultimately rests on the core common-sense belief that repeated careful observation reveals the world as it really is”. Quantum mechanics is not intuitive and does not align with most people’s common sense. But, as Lawrence Krauss often points out so eloquently, the universe does not give a damn what makes sense to us and it is the way it is regardless of our common sense.
Empirical observations, particularly in fields like physics, are often in violation of our common sense. This is because our common sense is a characteristic that we evolved to survive in the savannahs of Africa, not to understand quantum mechanics or, dare I say, macroeconomics.
Therefore, I do not think it is legitimate to say that quantum mechanics is common sense because it is based on empirical evidence, because propositions that we arrive at due to empirical observations so often violate our common sense. You cannot say that it is common sense to believe propositions that violate our common sense; you can’t have your cake and eat it, too.
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