Category Archives: economy

The Trouble With Experts

There was a documentary on CBC’s Doc Zone tonight called “The Trouble With Experts” (for those that missed it, if you live in Canada and have cable, I think it re-runs on CBC News a couple of times on the weekend). It was an interesting show about the proliferation of experts and (surprise, surprise) the trouble with them.

Nowadays, we seem to rely on experts a lot. We use experts to decide how to invest our money, how to run our businesses, how to eat healthily, which houses to buy, how to decorate our houses once we’ve bought them, which wines to drink, how to find a mate, how to raise any offspring that we have with this mate, and so on and so forth. Basically, we need to; life has become too complex. Do you disagree? Well then, let’s take a random question of major importance. Is global warming a threat to our way of life, and to what extent? Can you answer that question yourself? You could, as long as you’re willing to devote every waking hour for the rest of your life to reading scientific journals full of big words that you can’t pronounce. For those of us that have better things to do than that, this is where experts come in.

There are some problems with relying on experts though. Take the global warming question mentioned above. You might find one expert who says that global warming is a serious and imminent threat that can only averted through major lifestyle changes, and another expert who says that global warming doesn’t exist and any temperature increases can be explained by natural causes, and other experts who say other things. Experts can just lead to more confusion. In the book Wrong by David Freedman, he gives the example of how best to help people who suffer sudden cardiac arrest (whether by using CPR, AEDs, or whatever else). Consulting several experts, he gets about a half-dozen different opinions. I’m sure that further examples abound. Furthermore, experts often seem to fail us when the stakes are high. No experts seem to have predicted the 2008 housing bubble crash and economic meltdown, thus causing millions of people to lose their retirement funds. Fast-forwarding to 2011, no experts predicted this year’s Arab Spring. The program also provides several other examples of experts messing up; wine experts can’t tell a great wine from an ordinary wine (unless maybe they can see what the bottle looks like). Art experts can’t tell the difference between genuine works of art and fakes. Experts’ long-term economic and political predictions are no better than chance. There are many reasons why experts are wrong. Many have no real experience in their field of expertise. Many are swayed by what they expect to see, or what they want to see, or what they hope to see. Many are making predictions in inherently unpredictable fields.

If these experts are talking BS most of the time, why are we listening to them more? Well, they’re a lot more seductive. Here’s another example: There is an inorganic chemical called dihydrogen monoxide that is used in several industrial processes. Dihydrogen monoxide is a greenhouse gas and is found in acid rain. Over 300 people in Canada alone die every year after inhaling this chemical. This chemical has also been found in cancerous tumours. Yet, despite the dangers of this chemical, no government anywhere in the world has taken any steps towards banning this chemical or restricting its use. Why is that? Everything I said was true… however, “dihydrogen monoxide” is just another word for water. It sounds a lot more drastic when I use big, intimidating words, carefully select the information presented, and sound so certain about the problem. In fact, you can go to “expert school” to learn stuff like this: Always use words like “always”, “never”, and the like, never admit uncertainty or contradict yourself or anything like that, always dress up and look your best (anyone who has read The Little Prince by Antoine de Saint-Exupéry knows this), drive the best cars, stay in the best hotels, use jargon, and so on. If you do this, you’ll look and sound like someone who has something important to say, even if you don’t. Problem is, though, that most of the topics that we want advice on are not like mathematics or classical physics, where there is a fair degree of certainty; they concern topics that are inherently unpredictable. Thus, anyone who markets certainty is almost guaranteed to be wrong.

A second reason why there are more experts is because of the explosion of the media, such as 24-hour cable news networks. There’s a lot of time to fill, and one of the most entertaining ways to fill that is to have experts come on and raise alarm bells, bash other experts, and the like. The show didn’t discuss the impact of the Internet, if any, but I think that the Internet may make it easier for people to position themselves as experts (whereas previously you might have had to, say, write a book in order to attain expert status, which requires a lot of time and effort, the Internet provides easier ways of getting your name out there). Oh dear, did I use the word “may”? A bit of doubt on my part. Now no-one will take me to be an expert.

Another reason why experts are proliferating is that it makes it easy for people to cover their butts. Stock market “experts” may not know what they’re talking about, but, if a stock tanks, the clients would probably rather tell their bosses that they selected it based on the recommendations of experts than say that they made the choice themselves. It’s perhaps a sad reflection on our society that we’d prefer to point the finger elsewhere whenever something bad happens; it’s almost like we’ve become a nation of six-year-olds. However, that seems to be the way things are.

I think that this last reason is the most hazardous. For those of you that spend your days under a rock, there are problems in the world that are larger than what wine to choose for dinner. Take the economy, for example. Many people want the “experts” in Washington or wherever to figure out what’s wrong with the economy and fix it. Problem with this approach is that the economy is simply the sum total of everyone’s behaviour. If a lot of people are feeling insecure financially and so choose to not make a big purchase, take their money out of their stocks, hold on to their money instead of lending it to someone, not hire an employee, not start a business, not take other chances to make their life better, and so on, then the economy tanks. Conversely, once a lot of people resume buying, investing, lending, hiring, etc., then the economy gets better. However, if a lot of people sit around twiddling their thumbs and waiting for an “expert” to “do something”, thus ignoring any personal responsibility for the problem, the problem will just get worse. However, that’s what a lot of people do; they want to believe that somebody knows how to fix things.

So, what can we do? Freedman’s book Wrong offers some suggestions. Personally, I don’t think there’s an easy answer. Humans are sort of hardwired this way, so fixing the problem completely is going to involve individuals thinking hard about what they’re thinking about, instead of going on autopilot. But, if we as individuals want to live our lives in a more knowledgeable way, that path is open to us.

U.S. Debt Ceiling redux, redux

Okay, last post on the U.S. debt issue for a while.  Reading some more newspapers since the last time I wrote, it also appears that S&P’s downgrading of the United States’ credit rating is also based on the brinksmanship that led to the debt ceiling crisis in the first place, that the government of the United States is not really able to deal with issues as one would suspect they might be.  True, but sorry to see.  Unfortunately, there are politicians that aren’t really interested in acting in the better good of the country.

The United States federal government is addicted to debt like an alcoholic is addicted to alcohol.  Just like the alcoholic needs to quit, the United States needs to quit borrowing.  However, if the alcoholic were to quit cold turkey, he could die (from a seizure etc.).  Similarly, the United States can’t just stop borrowing like some Tea Partiers think it should; it needs to get off borrowing, but it needs to do it gradually, not all at once.

Alright, I’m going to write about something else now.

U.S. Debt Ceiling, redux

So the United States did manage to legislate an increase in their debt ceiling.  It’s kind of interesting how the United States’ credit rating got downgraded anyway and the stock markets are still in a freefall (although there was a bit of a recovery Friday afternoon).  What would have happened if the government didn’t manage to raise the debt ceiling?  It’s kind of interesting that the reason that Standard & Poor’s gave for cutting the U.S. credit rating is because of concerns over budget deficits, saying that the plan recently passed doesn’t go far enough (makes you wonder, are Tea Partiers in charge at S&P?)  If the debt ceiling didn’t get raised, would they happy that debts weren’t going to increase?

U.S. National Debt, Debt Ceiling, and Hyper-Partisanship

I’ve been following the gridlock in Washington around the need to raise the debt ceiling a bit lately.  I just wanted to share a few thoughts.

The U.S. National Debt (it’s so large I’m writing it using capital letters (-:  ) is approaching $14.3 trillion dollars.  Let’s say that there are 300 million people in the United States (this is a bit of an underestimate now, as the population hit 300 million five years ago). That works out to about $47,000 for every person in the United States.  Five years ago, the U.S. national debt was about $6 trillion less than it is now.  So, over the past five years, the United States has spent $20,000 per person more than it has taken in.  If you are an American taxpayer, have you, for each of the past five years, been getting $4,000 per year more than you’ve been paying in taxes over the last five years  (whether in money, services, or some other form) from the U.S. Federal Government?  I would imagine that, for most people, this is not the case.  One might then ask where all the money’s going.  I’m not going to analyze the budget in detail, but I’m just going to suggest that I would suspect that there’s a lot of money that doesn’t really need to be spent (for example, the government paying people or nations for jobs that don’t really need to be done).

There’s one more thing that I wanted to explore.  Is it just a coincidence that this hyper-partisanship (to use a word that I heard on CNN today, although I’m sure it isn’t a new word) that is causing this problem arises around the same time as the Internet has become popular?  I don’t think so.  I would suspect that the Internet has made it a lot easier to connect with people who hold extreme opinions (whether on the left or right).  Once one connects with others who share your opinion, it will probably be quite easy to drift into holding increasingly extreme views.  Such a thing wasn’t possible 20 years ago when the mass media was virtually the only media available.

It’s a very interesting problem and it will be interesting to see what the solution will be.

The Personality Economy

Last week I noticed several news articles that were worth blogging about, but I just started the blog a few days ago.  This is one of these blog entries.  I’ll get through that backlog shortly, I hope…

I saw in the New York Times last week indicating that Narcissistic Personality Disorder is being removed from the fifth edition of the Diagnostic and Statistical Manual of Mental Disorders (DSM-5) along with a few other personality disorders, and briefly discussed a debate among psychiatrists regarding this removal.  While most people that we might think of as being narcissistic probably don’t qualify as having NPD, narcissism certainly has been getting a lot of press in recent years; one good recent book about it is The Narcissism Epidemic: Living in the Age of Entitlement by Jean Twenge and Keith Campbell, which illustrates the increase of vanity and self-absorption in modern culture and the negative effects thereof.

Why is narcissism on the increase?  This is probably a complex issue with several root causes.  I’m going to look at one possibility in particular, namely the nature of our information economy.  While large corporations, for example, would be willing to pay lots of money for the right kind of information, it’s difficult to get the average customer to pay for just information.

One of the reasons is the ease of finding people willing to produce information for free.  Do you want a 5000-word-long, fairly well-written if bland in tone, referenced article about the Crusades?  Someone’s already written it on Wikipedia.  There is an enormous amount of information somewhere or another on the Internet, free for the taking.  This abundance of free information contrasts with the outcomes of the Industrial Revolution; while the prices of goods that started to be factory made decreased, it didn’t decrease to zero.

Another reason is due to the ease of reproducing information.  Information can be transmitted and copied endlessly almost instantaneously nowadays, and with a theoretically unlimited supply of a piece of information, it’s not surprising that the price go down to zero.

These two reasons aren’t necessarily Bad Things; it’s nice for people to share, and it only makes sense to give something away if it’s just going to be copied anyway.  However, if you’re someone that creates intellectual property, how can you get ahead financially?  Well, you have to sell something else; just selling your information isn’t going to work.  Certainly you could sell physical instantiations of your product (books, CDs, DVDs, etc.) or advertising, but you still have to stand out among the enormous pile of information out there.  How do you do that?  Well, probably the best way to stand out from the crowd is to sell yourself through being a celebrity or, if you can’t be a celebrity, at least act like one.

Certainly the allure of celebritydom is quite strong, at least in the United States, where people quit governing Alaska in order to become a celebrity.  Why?  Well, being a celebrity, or at least acting like you were one, gets you a lot of attention, which allows you to stand out in the crowd.  That attention should solve the problem of getting ahead financially as people flock to you and your product.  Being well-known has a lot of other advantages.  For example, Steve Jobs’ personality is certainly a good selling point for iPhones and iPads and iPods.  Even if you aren’t a CEO, there are obvious advantages to having a lot of people know you.

Getting back to the title, “The Personality Economy”, that may be a bit of an overstatement, there is a lot of economic activity generated via people’s personalities, and I can only see this increasing in the future.  Why are so many people narcissistic?  Because it pays off in today’s economy.