Russ Roberts (and Robin Hanson) on Truth and Economics
Jan 26 2009

EconTalk host Russ Roberts talks about the role of empirical evidence and bias in economics and why economists disagree. Roberts talks about how his interviews with various economists at EconTalk have forced him to reassess the role of empirical evidence in various debates in economics and economic policy. Roberts is joined by Robin Hanson of George Mason University for counterpoint and therapeutic advice for those uneasy about the scientific or non-scientific nature of economics.

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Explore audio transcript, further reading that will help you delve deeper into this week’s episode, and vigorous conversations in the form of our comments section below.


Johan Sigfrids
Jan 26 2009 at 8:49am

I believed it was Quine that showed that there exists families of logically consistent explanations for any given series of facts. Empirical data, even perfect empirical data, in itself is not enough to tell which theory is true.

There is also a interesting psychological point. When we observe, and interact, with the world we try to frame our observations in a bunch of different ways to process it. For example, we ascribe causal relationships to events, and so create narratives out of them. Sometimes the causal relationships we ascribe are true, sometimes not. But we generally tend to ascribe causal relationships to things were there are non, far more often than we fail to ascribe them to things where there, in fact, are causal relationships. This results in an situation where we explain more than is explainable. Lots of things for which we have theories are just random chance.

If there was a super-economist, without all the cognitive, cultural, and incentive-based biases with which we are encumbered, my guess is that to the question of the stimulus his answer would be: “I do not know”.

PS. I would think that prediction markets would have the same problem I have with Google. I’m sitting here with an unfathomable amount of information just a search-string away. Which string is the right one that would give me the information I really need? How do you know you are asking the betting market the right question? Might there not be some really important information, which you really need, but which falls outside the parameters of your question. A unknown unknown, so to speak. Something that you don’t know that you would need to know.

PPS. Is there anything in macroeconomics that couldn’t reasonably be characterized as ex-post storytelling?

Jan 26 2009 at 10:03am

Great podcast, thanks. I try to be honest and listen to and consider the other side’s data. It is all that I know to do.

IMO on the housing bubble, government and private people went down the same path. In fact people are people so I have doubts that government could have avoided this problem. The majority of people who were paying attention to home prices liked it, so how could the politicians bust have burst the bubble earlier and avoided the problem. It has to be the market that busts the bubble as it was. IMO stuff happens and we need to admit that we are not a few regulations away from not having these problems nor are we a few deregulations away from not having these problems.

Now as far as fixing these problems after they happen it might be that a strong response is good, at least in the short run, I do not know.

Matt Simpson
Jan 26 2009 at 11:54am

Johan: But this isn’t a question of deductive logic, which is what I’m sure Quine was doing. Evaluating evidence is a question of inductive logic. For that, you need Bayes and Jaynes. In other words, the evidence may be deductively consistent many different sets of logically consistent explanations, but if you do your bayesian updating properly, one theory should stand out above all others, if only a little bit.

Lee kelly
Jan 26 2009 at 1:27pm

Matt Simpson,

Probability is not inductive.

The following sequence S represents a series of 10 coin tosses:

S: T,H,H,T,H,H,T,H,T,T

From this sequence we can deduce the following proposition P:

P: the probability that a random element of S is equal to H is 1/2

Observe that S entails P, but P does not entail S. In other words, the logical content of P is a subset of the logical content of S (the reverse would be true if anything inductive were going on, which is why induction is invalid). A probability is, therefore, a deductive result; it tells you less about the sequence from which it is deduced than the sequence itself.

Can we infer anything about the 11th coin toss from the sequence? No, nothing at all, nor the 12th, 13th, 14th or any other. Proposition P is deduce only from S, not S + the 11th toss (although we can deduce that P is false).

Matt Simpson
Jan 26 2009 at 2:53pm


From what I understand, probabilities, used properly, are a measure of our uncertainty in a given proposition conditioned on our state of information. Note that the only reason that a coin is equally likely to land on heads or tails is because, given all the information that we know (a ‘fair’ coin and a ‘fair’ flip) it will land on heads roughly half of the time. The only reason we can’t infer anything about the 11th coin toss is because of our state of information – as far as we know, the coin flips are independent.

In principle were we to attempt to solve an amazingly tough computation problem, we could predict with near certainty how the coin was going to land, given all the physical details including how it was flipped. In practice, this computation is too hard, requires too much data, and going with 50/50 is good enough for our purposes.

See E.T. Jaynes’ work:

For a non-mathy treatment, check out Eliezer Yudkowsky’s posts at
reading in order is helpful.

Greg Ransom
Jan 26 2009 at 4:04pm

By your view of science, I don’t think Darwinian biology could be counted a science.

The leading problem is science is a false view of science.

That was Hayek’s well considered view.

And that’s my view, as a philosopher of science.

Greg Ransom
Jan 26 2009 at 4:05pm

Make that:

The leading problem in economics is a false view of science.

Jan 26 2009 at 4:37pm

Hanson’s mind works in interesting ways and he’s always an enjoyable guest on econtalk. It’s refreshing that Russ had the courage and openness to devote a podcast to this issue,i.e. how we know, or even whether we can know, what is true and what isn’t. The mark of a good scientist are his efforts to disprove his own hypotheses; supposedly Darwin tried doggedly to do so. Most of us look for confirmation of our preconceptions. I guess one takeaway is, We could all benefit from more self-skepticism and modesty (of course, you would benefit more than I!).

And BTW politicians could benefit from more open-mindedness about betting markets.

Jan 26 2009 at 4:49pm

where’s the Card paper link?

Jan 26 2009 at 4:53pm

I really appreciated this podcast, Russ. One theme coming out of the Obama administration is that they are going to listen to science and pay attention to facts. The implications being (1) that the Bush administration did not do that and (2, more subtle) that they are going to frame their politics in terms of science and facts, so that detractors will be de facto heretics against reality. I expect that many will eventually be asking “is that science” and “is that a fact” over the next four years. I’m not optimistic that critics of the Obama administration will figure that out anytime soon.

I also appreciated your soliloquy about how you choose guests for EconTalk and the style of conversation you engage in. Russ, you do a great job with giving your guests a soapbox to make their cases. There have been many that I fundamentally disagree with, but am better for knowing where they are coming from. Armed with Fazzari’s thoughts, for example, one can question whether much of the proposed economic stimulus is even stimulating from a Keynesian perspective.

Gavin Andresen
Jan 26 2009 at 4:59pm

Science is distinguishable from pseudo-science because Science makes testable predictions, and Scientific Hypotheses are falsifiable.

Darwinian biology is Science because biologists have devised experiments to test it (see, for example, Richard Lenski’s E. coli long-term evolution experiment).

Greg Ransom
Jan 26 2009 at 5:45pm

Good discussion with Robin.

Russ, you might find this article by Larry Wright helpful:

Larry Wright, “Argument and Deliberation: A Plea for Understanding.” Journal of Philosophy (November 1995), 92(11):565-585.

Wright’s special focus is on areas of dispute where agreement is very difficult to reach, and were long, long, _long_ conversations are required to get there, if agreement is possible at all.

Wright is a philosopher of science and has written extensively on the nature of explanation and on informal reasoning.

(Wright’s claim to fame is having produced the most important work on teleological explanation since Aristotle, in the view of philosopher of biology and economics Alex Rosenberg.)

Greg Ransom
Jan 26 2009 at 5:51pm

Gavin, in my well considered view you are wrong on both count, below.

Interestingly, Hayek forced Popper to agree — Popper was _wrong_ about the scientific status of biology, and the necessity of Popper’s “falsifiability” criterion as a marker of “science.

Popper admitted he was wrong and Hayek was right — in the complex science which explained “the principle” falsifiable predictions were not required and were most often not possible.

Our increased understanding of non-linear phenomena even in the physical sciences has shown that much of even that domain consists of models and understanding that cannot provide us with specific predictions at particular points in time and space — and yet science provided explanations and extends our understanding never the less.

This picture of science you have is itself pseudo-science.

Gavin writes:

“Science is distinguishable from pseudo-science because Science makes testable predictions, and Scientific Hypotheses are falsifiable.

Darwinian biology is Science because biologists have devised experiments to test it (see, for example, Richard Lenski’s E. coli long-term evolution experiment).”

Jan 26 2009 at 5:56pm

By the way, I saw deLong’s comment about Larry White’s arguments too and deLong fell immediately fell in my estimation, not because of his position but because of the nature of his argument. What’s the difference between saying “you’re wrong because you’re ‘Austrian'” and “you’re wrong because you’re a “fascist,” or “communist,” or “the bogeyman.” It’s just name-calling, and name-calling has always struck me as a resort of those with a weak argument.

Vincent Davis
Jan 26 2009 at 6:00pm

I think the problem is that often conclusions rather than assumptions and logical deduction are the topic of debate. I once read that if two people disagree on a conclusion they should seek a flaw if the logic or disagreement in an assumption. I think we forget or don’t think of our beliefs as conclusions based on logic and assumptions.
As you described your debate about grow local it reminded me of the debate about evolution. (no religions statement or offense intended) The religious group has a belief founded on faith. The science view of this might be summarized as the religious conclusion is not a conclusion but a root assumption. The scientist have have spent 150yr? refining there assumptions and updating there conclusions. My point is that if you have a belief or assumption that is very broad it is difficult to have a fruitful debate. Even if you have a nice set of assumptions, good evidence for them and perfect logic that brings you to a contradictory conclusion it may not matter.
Debate: The art of attacking another’s conclusion by rejecting there assumption while not revealing the weakness in you assumptions.
Discussion: Seeking, clarifying and refining your assumptions to reach a better conclusion.

Lee Kelly
Jan 26 2009 at 6:42pm

From what I understand, probabilities, used properly, are a measure of our uncertainty in a given proposition conditioned on our state of information. – Matt Simpson

That seems to be the prevailing notion, but I think it pure nonsense.

Popper admitted he was wrong and Hayek was right — in the complex science which explained “the principle” falsifiable predictions were not required and were most often not possible. – Greg Ransom

If a theory cannot be tested by experience, then it is unscientific. That does not mean that metaphysical theories cannot be true or useful to scientists and, in fact, Popper asserted this regularly. But ‘science’ is just a word. What matters is that some theories can be criticised using evidence and others can’t. Popper simply proposed a convention: those that can be falsified (i.e. criticised using evidence) are scientific.

Lee Kelly
Jan 26 2009 at 7:14pm

Dr. Roberts,

Suppose that only a small group of people know the rules of chess, and they keep these rules secret. However, they allow anyone to watch them play, and audiences enjoy betting on who will win.

Some in the audience begin recording data and noting correlations. They observe things like, ‘if a player loses his queen first, then he will lose’, ‘players who use white pieces win very slightly more often than those who use black’, or ‘if a player moves his knight first, he usually loses’.

These audience members are not trying to understand the rules of chess, but nonetheless are soon able to predict winners and losers with regularity.

Others in the audience take another approach. They develop hypotheses like, ‘rooks can only move horizontally’, ‘the king can only move one space at a time’, or ‘castles can move no more than five spaces at a time’.

These audience members are trying to discover the rules of chess by formulating hypotheses and testing them. None have access to the official rulebook, but through trial and error may learn the rules of chess. Austrian economists are like these audience members, and I think they are right.

Those who look for correlations tend to be empiricists or pragmatists. They tend to be unimpressed by the arguments of those who are trying to discover the rules of the game. They see them as not being empirical enough, or not being “scientific” enough.

Lee Kelly
Jan 26 2009 at 7:24pm

If a theory cannot be tested by experience, then it is unscientific. That does not mean that metaphysical theories cannot be true or useful to scientists and, in fact, Popper asserted this regularly. But ‘science’ is just a word. What matters is that some theories can be criticised using evidence and others can’t. Popper simply proposed a convention: those that can be falsified (i.e. criticised using evidence) are scientific.

I should stress. It is always possible to claim that evidence has been misinterpreted to save a theory from refutation. If a theory is to be criticisable, then people need to decide what kind of criticism they will accept. In other words, theories are refutable if people choose to make them refutable i.e. clarify the problem which their theory is an attempt to solve, and then specify what kind of argument or experiment could be deployed as a test.

Jan 26 2009 at 8:45pm

Great show!

Extremely refreshing to hear a discussion about truth, ideas, facts, and biases, as opposed to an argument.

One major oversight, though, IMHO:
No mention of Taleb, who has been on the show and offered incredible insights that touch on many of the ideas discussed in this podcast. I would have enjoyed hearing Russ and Robin discuss Taleb’s views on economists, knowledge, epistemological arrogance, etc.

Gabriel Rossman
Jan 26 2009 at 9:00pm

Since someone asked, the famous Card and Krueger cite is:
Card, David and Alan B. Krueger. 1994. “Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania” American Economic Review 84:772-793.
This was a time series natural experiment comparing two similar and adjacent unskilled labor markets before and after one of them experienced a policy shock.

Less often mentioned in the popular debate (and AFAIK never mentioned on this podcast) is the paper they published the following a year, a meta-analysis of the literature.
Card, David, and Alan B. Krueger. 1995. “Time-Series Minimum-Wage Studies: A Meta-analysis.” American Economic Review 85:238-243.
This meta-analysis is actually much more convincing in that it shows the literature has a suspicious negative correlation between sample size and statistical significance, a pattern that is hard to explain aside from publication bias. Card and Krueger might say that they are right and the others are wrong, but my interpretation of the meta-analysis is that the short-run effects on unemployment of small changes in the minimum wage are close to zero. (The evidence doesn’t really tackle long-run effects or “living wage” type large changes, but of course you can make predictions from theory). I mention this because the meta-analysis is an elegant attempt to take seriously some of the very bias mechanisms discussed by Roberts and Hanson in this podcast.

By the way, another answer to the Ayres question of “name a consensus changed by data” would be the effects of fatherlessness on child well-being. Until the early 90s the consensus was the fathers don’t much matter (or to be precise, the effect of father absence is entirely mediated by income deprivation which has the policy interpretation that cash aid is a good substitute for dad). This consensus became untenable with research by McLanahan and Sandefur showing that fatherlessness not only has effects mediated by income, but also direct effects.

Jan 26 2009 at 9:01pm

Russ and Robin outstanding job. I am sure that you will get some sniping from the establishment, but to me you score big.

As for winning debates, you likely will not win on votes of buying local, but when the reality of choices and price come into play, efficiency is the dominate market player and buy local and other fluffy categories are niche markets. That does not mean they do not exist but debates are not where market decisions are made.

Global warming catastrophy is promoted but the huge price of a carbon tax to do something about it prevents real action and instead we get fluffy niche action, until the pain is eminent. This to me appears that while losing the academic battles the market seems to have a rather sensible balance.

Image the confusion induced when the carbon tax collector tries to spend his rents in a manner that does not produce as much carbon as the tax reduced. The free market involves a lot of experimentation including a lot of crazy stuff that only sound good.

The value of the market is that it is scientific as users above have pointed out. There is a testable hypothesis that a product has value and the result of the market test is if product survives.

As for how do we progress. Russ, I would not dispare too much. The bought opinions being professed by academia are established based on market power. Robin brings out well the price of being a “Dr.” for sale or in a profession that does not challenge those opinions that do not meet scientific standards. Economic professors are no different than elected officials, once installed into the instution they use their power based upon the incentives that they face.

Russ, you gain my respect by following one of Stephen Covey’s rules. First seek to understand, then to be understood. If we want to change minds talking past one another will not work. You earn my greatest respect when you discuss with a person of complete different perspective and ask with genuine interest for them to clarify their view.

I would add that physics is made up of the same folks winging it, being paid to have a consistent opinion and subject to social pressures. Their science at the edge is based on guess and hunches just as economics at the edges. To prove the point have you heard of cold fussion?

I believe that ecomomics is a science but just as all fields the pomp and circumstance can easily hide the true science. Is difficult to change the momentum of ideas and to think truly new scientific thoughts, but that is why real scientists are so valued.

John Dyer
Jan 26 2009 at 9:34pm


Robin Hanson’s Home page is pointing to Eric Raymond’s home page though.


[Fixed. Thanks!–Econlib Ed.]

Andy Kneeter
Jan 26 2009 at 11:51pm

There’s plenty of good evidence supporting sound market-based economic principles (i.e. – the Great Depression, 1970s stagflation, all post-tax cut recoveries, Japan in the 1990s, any hyper-inflationary economy, any low-tax & low-regulation economy like Hong Kong, etc…). There’s none supporting bad economic principles (i.e. – Keynes).

The reason most people gravitate towards bad economic theory vs. good economic theory is they prefer the message. An increasing percentage of people prefer the promise of pain-free, happy outcomes made by politicians (Milton Friedman predicted this). We have to ‘hit bottom’ before we’re willing to accept the truth (Milton Friedman predicted this, too). Unfortunately, we’re just not there yet.

Hold on to your seats. It’s going to be a rocky ride.

Timothy Lord
Jan 27 2009 at 5:27am

Thanks for having R. Hanson on again — one of my favorite EconTalk guests, which is not to denigrate any of the others 😉

I think BoscoH’s comment above re: the subtle and unsubtle ways that debates are framed is especially important to keep in mind; a lot of problems have been and will (increasingly? perhaps) be framed as both capable of being fully comprehended, and technically soluble — when the reality is harder to deal with, that human desires and uncertainties are not only omnipresent but the source of the happy side of chaos as well as some downsides.
Imagined (or sincere) certainty on questions that don’t seem amenable to certainty make me nervous, in the fashion of Reagan’s joke that the scariest words in the world are (forgive the paraphrase) “We’re from the government, and we want to help you.”

Jan 27 2009 at 8:36am

I’ve read that the first rule of semantics is that a word never means the same thing twice. If this is correct it would mean that truth-1 is not truth-2 is not truth-3.
We’re disillusioned to find we’ll never discover the TRUTH but perhaps this is a good thing since it means we have one less illusion to overcome.

Richard Sprague
Jan 27 2009 at 9:31am

This discussion reminds me of the way sports fans argue. Although any fan is well-versed in the statistics of his team (empirical data) and there is an objective definition of success (Superbowl, World Series), you never see the losers rushing to embrace the winning side. (“How could I have been so blind? The Yankees really are the best!”)

There are many reasons a rational person will dismiss logic and empirical evidence when it’s at odds with other goals.

Jan 27 2009 at 9:46am

The broad theme I see with our views and truth and reality suggest that as our views are questioned by facts and reality we tend to like to claim or suppose that things are too complex to be able to offer any certainty.

We see this fall back argument in discussions on evolution, global warming and now economics. The broad truths that my dog and I are cousins, that we are contributing to climate change and that the economy thrives when lots of money flows through a large and prosperous middle class and collapses when it doesn’t can not be obliterated by the complexity of the subjects at hand.

Mark K
Jan 27 2009 at 11:25am

I admire people who are willing to look at internal biases and how that will influence the ‘facts’ that are observed. I am in the field of science, and even in that world you have dogmatic perspectives that are resistant to change, although eventually the data usually wins out owing to the ability to isolate the subject of study from extraneous variables and to reproduce the results. In economics, finding uncorrupted data is nearly an impossible task at times, as Russ points out in the WalMart large city wage example. His doubt about whether economics rises to the level of science is well founded. In even reading the quote by DeLong, he is inviting the question as to whether uninhibited individual choices can lead to the greatest economic welfare, or whether government can play a role in economic health. The self-examination of his Hayekian perspective is a useful exercise, and in my mind is the definition of scholarship. Ultimately, we must all decide whether we are to be opened minded about the possibilities of our biases and how that affects our theories and conclusions. Great breakthroughs can happen if we challenge our own perspective. Bobby Fischer became one of the greatest chess players of all time partly by playing critical games against himself.

Jan 27 2009 at 12:39pm

Russ… I have been struggling with similar questions myself. Great job…

The fact that you are even asking yourself these questions shows that you do have a concern for the truth.

Ken Century
Jan 27 2009 at 2:52pm

I was surprised to hear no mention (neither during the podcast nor in the comments) of Thomas Sowell’s outstanding work – “A Conflict of Visions”. In this book (which is the least targeted to lay readers of all the books I’ve read by Sowell, but is nevertheless very approachable), he defines and makes the case for two “visions” of man which each of us “subscribes” to, namely the “constrained” versus “unconstrained” vision.

In a nutshell (paraphrasing the entire book), those of the constrained vision tend to see man’s overall ability as limited and thus tend to seek “tradeoffs” more so than “solutions”, whereas those of the “unconstrained vision” believe our capabilities are essentially bounded only by our collective imagination and will. The constrained visionist always asks, “OK, but at what cost”, whereas the unconstrained vision is best exemplified by the colloquialism, “If we can put a man on the moon, why can’t we …..”

Many of the frustrating anecdotal exchanges that Russ referred to out of his personal experience clearly boil down to the fact that he subscribes to the “constrained” vision of man, whereas his counterpart in the incident did not. The bias lies at the very core of our being and worldview.

The book, in my opinion, provides a refreshing view of what can become a very frustrating topic for intellectuals on both sides. (Why don’t you see it my way???) Sowell also did a very good job of keeping the book balanced, even though his personal worldview is also clearly of the “constrained man” variety.

J Roberts
Jan 27 2009 at 4:02pm

Thanks for the great discussion. From the start of the podcast, the first thing that came to mind was Thomas Kuhn’s The Structure of Scientific Revolutions. When you spoke of whether you or the other can or cannot accept each other’s evidence, I was reminded of Kuhn’s discussion of the difficulties of communication between two scientific paradigms trying to describe the same phenomena. One paradigm may even call something “noise” that another paradigm recognizes as signal. In the end, the successful paradigm explains more data more effectively. For example, Einstein’s theories did not replace Newtonian theory, but subsumed and extended it to the relativistic domain.

In the economic domain, I suppose, as the sophistication and skill with which data can be measured increases, the ascendant paradigm will be the one that is most successful at describing what is observed. Refinement in measurement is a big part of Kuhn’s description of scientific revolutions, or paradigm shifts.

Greg Ransom
Jan 27 2009 at 4:56pm

Russ, there are some very good philosophers of science who now a lot about economics. You might enjoy have a discussion with them on economics as a science, or economics as an explanatory project, etc.

Two recommendations:

Alexander Rosenberg — Duke

Daniel Hausman — U. of Wisconsin

Another suggestion: historian of economic thought Bruce Caldwell, who’s written perhaps the best book on the history of “methodology”.

Greg Ransom
Jan 27 2009 at 4:59pm

On the topic of macroeconomist vs. macroeconomist, and the, who is right, Keynes or the Austrians thread of prior weeks, I might recommend you invite David Laidler, author of _Fabricating the Keynesian Revolution_, on as a guest.

Few people know more about the original formation and debates of the emerging “Keynesian” consensus, along what was gained by the “revolution” — and what was lost.

Eye opening stuff.

Jan 27 2009 at 11:30pm

I’ve been thinking on and off on the data vs theory discussion in the podcast most of this morning. And I got to thinking of the surprising discovery, in my personal scientific experience, that when one comes up with data that is interesting for any reason and that passes peer overview, the follow up question is mostly ‘and what is the theory that would explain this data?’ This question was surprising to me when I started doing science – it’s unnatural to ask this question and has to be trained in. I think this question is closely tied up with the scientific primary directive – not to fool oneself. When I was first asked this question, I remember having that feeling that a senior scientist was telling me the investigation was unfinished.
On the other hand answering the theory question, at its best and most satisfying, gives a burst of insight – there is that ‘ah ha!’ moment where one realizes that an idea illuminates not only the data at hand but also other dark corners that have been waiting for explanation as well. With a good theory one has the feeling that ‘this explains everything’.
So, there is one tool that can be applied to ourselves and others. Can we move easily back and forth between theory and reality? It’s hard with complex systems. But putting the bar a little higher, gives me the feeling that I’m not willfully encouraging cargo cult science.

Jan 28 2009 at 5:23am

Russ, I really enjoyed this podcast, especially your willingness to examine the processes behind informed opinion-making.

I left the economics profession in the early 1990s, disturbed by models that required never-ending growth on a finite planet, and a resource economics that studied the “optimal depletion rate for whales.” Your training may give you more hope for finding technological solutions for depletion of finite resources, especially oil.

As for economics, I think my bias lives in a fundamental question: “How does the economy serve humanity?” The current arrangement often seems like humanity serving the economy, which may have roots in the European experience of feudalism.

In the past 50 years, we’ve been taught (by marketers) to focus on wants rather than needs. I suspect the current situation is causing many people to contemplate what they really need.

I have come to hold a more biological view of humanity. We are one of many species that has risen and will eventually decline (hopefully in a few million years rather than the next 50). I would like to see us develop a more mature perspective in the next 100 years. I guess I should have studied biology instead of economics at university 🙂

Thanks again for your podcasts. I always find them engaging even though my economics training was at a “liberal” university.

Jan 28 2009 at 3:29pm

You make an eloquent argument for lack of certainty. But inaction as a result is in fact a decision not to do anything.

Surely the question is, what decision will cause least damage if it’s incorrect.

Take the bailout. Either it’s a good idea or not, and there’s plenty of opinions on both sides. The safest path must be to start small, and review monthly.

(We’re in strange times such that a $50 billion bailout which a year ago was unimaginable would now be considered small.)

Jan 28 2009 at 10:55pm

This sort of nit picky, but you said Ayres stated that the Levitt abortion study was the gold standard of empirical work. I thought he actually said that it was the Heckman paper on civil rights issues.

Russ Roberts
Jan 28 2009 at 11:58pm


He did say that the Heckman study was the gold standard but at the same time, he also mentioned the Levitt and Donahue study on abortion and crime. My memory is that the latter is the example he used for empirical work that was so well-done that it forced skeptics to accept the other side’s views. (Which is weird because I don’t think that study convinced the skeptics at all) At least that’s what I remember–I’ll go back and check it out.

Jan 29 2009 at 11:34am


Great topic and an excellent intro. A science is a set of truths that are repeatable and verifiable neither of which is true of macro economics. All economists need to be introduced as artists masquerading as scientists.

Jan 29 2009 at 2:37pm

I am surprised that more people haven’t realized one very obvious point about how America got into this situation. The American dream which involves owning a home, which has been the focus of so many regulations to increase homeownership, has been twisted into the cause of our problem.

The investment in a home should only be an investment for the purchaser and the creditor. The investment in the future of the family is expected, and the profit made by the creditor from the interest collected on the loan is also expected, but should be the only investments involved.

Never should any loan be sold out into the stock market for any reason. If none of these mortgages, good or bad, entered the stock market, we would be no where near this economic situation.

As soon as those became investments beyond the owner and creditor, their failure insured that the damage would be widespread. They could have just been foreclosures and small banks failing, not even close to the large scale failures of today.

To understand this you really need to step away from the typical thought patterns of extreme capitalism and think about the basic ideals of capitalism, Customer Service! No business that has sold its loan out to the stock market can properly re-negotiate in their customers best interest, since they now have investors interests to worry about too.

Michael Hartwell
Jan 29 2009 at 6:17pm

When I listened to the Buy Local debate, it wasn’t the logic-versus-studies mismatch that struck me as your problem. Bill McKibben went first and demanded that you spend your opening remarks responding to a list of points and studies. He chastised you for not using your opening 20 minutes to address his 15 points.

To me, this resembled the “Gish Gallop” technique of creationist Duane Gish. In a debate, Gish slings a barrage of different points and each one would take a few minutes to address. With so many points and so little time, its impossible to refute them all and still present your own argument.

My favorite moment was when he spoke about a town outlawing large stores to keep out Wal-Mart, and defensively said that the ordinance was passed with a vote. So instead of defending the logic of the policy, he hid behind the process it was erected.

Jan 29 2009 at 8:04pm


You may be interested in the work of Kenneth Hammond, specifically his 1996 book Human Judgment and Social Policy. It discusses the issues you’re struggling with in some detail. I think you will benefit from his discussions of the difference between the coherence theory of truth (logic) and the correspondence theory of truth (empirics).

Michael Tan Creti
Jan 29 2009 at 8:59pm

It seems to me that the philosophical basis of this discussion of the separation of data and logic points to the failure of contemporary macroeconomic to have constituted itself as a critical science. There seems to be a vacilation between idealism and materialism, the impass of the the 19th Century. As such there does not seem to be an accepted pattern or even a debated pattern for apply judgment to data. The evidence of this failure seems to be indicated by the present debate, stimulus is labeled Keynsian, governement business co action is nationalization, and failures are moralize as greed and dishonesty. We look for news about the economy and we are treated to yet another Madoff story. Where is the critical thought to be found.

Jayson Virissimo
Jan 30 2009 at 12:06am

Russ, your show keeps getting better and better! Please continue to take the show in the direction that it is going.

Jan 30 2009 at 12:44am

Interesting podcast and impressive comments.

One quick comment of my own:

What about free trade? Hanson said (or at least he hypothesized) that economists tend to agree in policy areas where there is not a contentious real-world debate which distorts incentives and makes truth-telling hard.

But isn’t the free trade-protectionism debate one where there are clearly powerful passions and powerful interests, yet the majority of economists still say that free trade is wealth-maximizing?

Jan 30 2009 at 2:58am

I’ve been listening to economic discourse since the Corn Laws, and it was refreshing to hear the opening rambling that made me feel nostalgic for my second term as prime minister back in… in…. well, a long time ago.

I hope every so often you take off that Chicago necktie and let loose for 10 minutes. This time was a little long as I took the horse for a walk and found you were still talking when I got back.

And even though you may not want to win debates against guests, please keep pushing them. That is what makes this podcast interesting.

If they bristle at a little shove, tell ’em Gladstone sent you.

Jan 30 2009 at 8:41am

I concur with what Mark K wrote:

“Ultimately, we must all decide whether we are to be opened minded about the possibilities of our biases and how that affects our theories and conclusions. Great breakthroughs can happen if we challenge our own perspective.”

The great outcome, when people aspire to this end, is agreement with MY positions without further delay!

🙂 Great Pod cast and well said Mark.


Zack Johnson
Jan 30 2009 at 11:46am

This entire podcast reminded me of a book I read while getting my MBA. I highly recommend it to anyone wanting to learn why people push ideas and state pseudo-facts as facts. Its all about what we are rewarded for in some way or another.

The book is “Judgment in Managerial Decision Making” Sixth Edition by Max H. Bazerman.

ISBN: 0-471-68430-9

Doug Rice
Jan 30 2009 at 1:59pm

I second the reaction of Russ to people who seem so certain that the data they collect and analysis they do on it accounts for all possible factors related to their particular studies. I find it absurd when people mistake statistics for a means of complete explanation. Statistics is not about certainty. It is about uncertainty. The usefulness of statistics is to “shed some light” on the issue and not completely eliminate the darkness.

I find it strange that people in other academic fields and general society scorn economists for never being able to make up their minds. Economics is a social science. Black and white is not attainable and I think those who propose they have found it need to check the lens they are looking through. All social sciences deal with the human experience. It simply is not something that can be weighted and measured, like the composition of dirt. Economics, which deals primarily the the choices and incentives involved in the human experience, is even more abstract. We live in a world of existential ambiguity. Some things, namely those facts found within the hard sciences, can be known nearly for certain by reasonable people. Yet, this sort of knowledge isn’t particular useful to we human beings who strive to find some sort of meaning in life. How things happen isn’t as pertinent to our livelihood as why they happen. Thus, the social sciences are born.

I think it is admirable of the economist to say, “I don’t know.” In that more than anything, there is truth. What is even more admirable about economists who continue in their pursuit for truth is that they don’t only say, “I don’t know.” They say, “I don’t know, but I do care.” The human experience can be summed up in that simple statement. All things are uncertain in our existence, but life is about attempting to figure them out. Economists, I think, may know that better than anyone. That’s why they disagree and argue so adamantly about which factors explain any given event, even though deep down they know there is no way of knowing. We still have an incentive to care, to strive to figure out the truth, and to defend our findings.

Our existence is like a huge maze, a labryth with encrypted codes along the walls that lead us gradually through to the end. Some people, like biologists, chemists, etc, study what the walls are made of–they’re texture, color, compostion and all the physical properties. Some people, like the arrogant and politically motivated social scientists and who think they have it all figured out, take one look at the ancient language and announce to everyone around them, “This way!” The ones who really want to know how to get through the maze, though, will debate admantly what the codes on the walls say, even if everyone around them says in digust that “they just can’t reach a conclusion!”

Perahps I’ve gone a bit too philosophical, but I think it is good to be reminded of the umbrella of uncertianity under which we are living. Economists need to be cautious about making definitive claims but not discouraged about the fact that existence is amibuous. What is important, as Robin discussed late in the podcast, is that we stay honest with ourselves and our incentives. It’s difficult to do, maybe even impossible, given our cultural biases. However, it’s worth the try for the sake of uncovering truth.

Jan 31 2009 at 4:19pm

Doesnt Thomas Kuhn’s ‘On the structure of scientific revolutions’ address some of the same points?, and he was looking at science where the system (ie the rules of science) is stable and it is easier to isolate factors than in social sciences, and as opposed to economics where the factors cannot be controlled and the system is non-stable as it is moved over time by what the players think and what they do- making any inference much more difficult.

Jan 31 2009 at 4:25pm

Russ, the poet Robert Graves probably puts well the issue of ‘how confident I am that I know what I know’:

Robert Graves – In Broken Images

He is quick, thinking in clear images;
I am slow, thinking in broken images.

He becomes dull, trusting to his clear images;
I become sharp, mistrusting my broken images.

Trusting his images, he assumes their relevance;
Mistrusting my images, I question their relevance.

Assuming their relevance, he assumes the fact;
Questioning their relevance, I question their fact.

When the fact fails him, he questions his senses;
when the fact fails me, I approve my senses.

He continues quick and dull in his clear images;
I continue slow and sharp in my broken images.

He in a new confusion of his understanding;
I in a new understanding of my confusion.

Jan 31 2009 at 7:21pm

Hi Russ,

I am a big fan of your podcasts, but as podcasts go, I find them to be a bit long.

Hope you will consider this a constructive piece of feedback and not a shot to the very wonderful info. you provide and present. There are always so many interesting things to talk about!

I myself typically end up on the verbose end of things, but when it comes to this kind of media, I’ve found that being concise can often win you more followers/listeners.

Jan 31 2009 at 8:19pm


I enjoyed the podcast and your 25+ minute monologue to open the show.

The only comment I frowned at was when you said you weren’t challenge your guests with opposing views because you don’t want to attack them; you want to hear them out.

Rather than be in attack mode, I think it’s perfectly fair to ask something like: “What do you say when another economist says X?”

I think it’s equally important to hear somebody’s theory/view as well as how they answer/react to questions. And your style is certainly conducive to asking thoughtful questions in a conversational (not critical) manner.

Jan 31 2009 at 11:09pm

To better understand what drives ideological biases, check out Jonathan Haidt’s great (and short) lecture about Democrats & Republicans.

Steve Spiller
Feb 1 2009 at 11:34pm

Russ – To our “democratic legislators” (small caps because they have yet to earn their stripes) – Since when does a “crisis” and the compulsion to “do something” over ride the Hippocratic Oath?

Ganesha Bhaskara
Feb 2 2009 at 3:16am

Hi Russ,

I almost done with my PhD and for most part of it, I have been struggling with the similar questions you ask, but in the realm of engineering. The field of study I deal with, unlike physics is profoundly affected by human activity including creativity. Somewhere down the road, my quest into understanding what is correct or incorrect transformed into “where is value”. At least in the domain of my interest, the answer turned out to be market guided “constructive search”.

Econtalk has greatly influenced my thinking. Thank you very much for making this podcast series.

Robb Preston
Feb 2 2009 at 9:06am


Two pieces of unsolicited advice.

If you never have, I recommend reading Orwell’s essay Notes on Nationalism, which I enjoyed recently. Your meditations on truth struck a cord with his theme that biases (which he refers to as nationalism — membership of the ‘sides’) are deeply corrupting, and particularly prevalent among the intellectual classes. He offered no great solution, but suggested it is a moral effort to guard against to be begun by recognition in one’s own thought. Incidentally, this quote “One has to belong to the intelligentsia to believe things like that: no ordinary man could be such a fool” — appealed to my biases and may also appeal to yours.

Regarding discussions with local production advocates, appealing to their ideals may be more fruitful than outlining how illogical is their case. My personal take on the autarky-of-one rationale is that is borne of fear that, at its root, relates to war at the national level and survivalism at the personal level. This is likely to be uncomfortable company for many of your opponents. (For example, in Australia, measures gaining currency to deal with food miles, drought and climate change are home grown food, water tanks and solar panels on houses — “as long as I’m OK”.) Further, for those of a humanist bent, pointing out that it means turning back the benefits that trade usually brings — less focus on national or ethnic differences; greater cooperation; not beggaring poor neighbours — also appeals to those of lofty ideals. Sure, say it is dumb too and be right, but this may leave them with a sweeter taste in their mouths.

Finally, thank you for the podcast and for quoting from Wodehouse on the New Deal last year. Slip them in at every opportunity. It is one of very few mentions of politics in his books; heartening that he was again right as well as funny.



Bo Zimmerman
Feb 2 2009 at 3:55pm

It’s always interesting to listen to people reason and argue about the pointlessness of reasoning and argueing.

Pragmatism? Nay. That way lies Nihilism.

Feb 2 2009 at 4:41pm

I am a newcomer to Econtalk and have been eagerly listening to many of them.

How do we know what we know? This the central question of epistemology – a branch of philosophy. This is perhaps the single most important question in all of philosophy. One’s approach to this question is of crucial importance, not only in intellectual disciplines such as economics, but in every field of human endeavor from agriculture to politics to physics, etc.

Because of its enormous importance, it is profitable to investigate this philosophical question on its own. I would recommend Ayn Rand’s Introduction to Objectivist Epistemology for a solution to how exactly concepts can be tied to reality contextually and confidently while retaining their generalizing or inductive nature.

Bryan Wilson
Feb 2 2009 at 9:15pm

Thank You for this great podcast.
If I were one who advocated for bigger government or for socialism. Then I would be very happy with the confusion. In order to make my point I would use cost vs. benefit studies to say that my way is better for society. I could always come up with more studies, and would never worry that I didn’t have all the variables pinned down, simply because it doesn’t matter if I do or do not. Soon others who did not see the shrewdness of my plan will be compelled by my evidence. They will blindly preach my message for me.
To illustrate why this is so shrewd let me step into another scenario.
If I were filling my gas tank and someone came to me and told me that he would give me a thousand dollars to take a package across the street to a man at a telephone booth. I would first want to know what was in the box, and why the man was not willing to do it himself! If I were to skip this step and just do a cost benefit analysis then I would be gambling with my morals.

The problem with a study, other than that it is difficult or impossible to account for all variables, is that it is only cost vs. benefit no matter how prestigious the author may be, it is still the answer to the wrong question.
Is it the proper role of government to tell business owners what to do with their resources, or are we free to try and free to fail in our business relationships? Is it proper for government to steal from one man to give to another, or to give to a business? These are the questions we are to ask first.

Dr. Duru
Feb 6 2009 at 9:10am

Hi Professor Roberts,

I really enjoyed this podcast! One of the best yet. Glad to see you take the time out for some serious introspection and turn a skeptics eye onto the profession and practice of economics. I wish more economists could demonstrate this kind of humility.

Ray Mangum
Feb 17 2009 at 9:25pm

Carol: “As for economics, I think my bias lives in a fundamental question: “How does the economy serve humanity?” The current arrangement often seems like humanity serving the economy, which may have roots in the European experience of feudalism.

In the past 50 years, we’ve been taught (by marketers) to focus on wants rather than needs. I suspect the current situation is causing many people to contemplate what they really need.”

You make an excellent observation here, although we don’t need to go back quite as far as feudalism to see the problem. Nor is it the fault of marketing, the old Galbraith “dependence effect” that I think was effectively dispatched by Hayek in “The Non-Sequitur of the Dependence Effect.”

Go back to the Podcast with Fazzari on the Keynesian explanation of business cycles, which are a result of a lowering of aggregate demand (for whatever reason), and are solved by the demand being made up by the government. Nobody I know of has commented on how weird this explanation really is. A lowering of demand in the aggregate ought to mean the producers are either not making the right sort of thing people want, or too much of it. Shouldn’t the producers change or scale back, rather than consumption be modified to fit an ideal structure of production? This certainly putting the cart before the horse, or, as you say, “humanity serving the economy”.

I am reminded of what Chesterton said of George Bernard Shaw:

“If man, as we know him, is incapable of the philosophy of progress, Mr. Shaw asks, not for a new kind of philosophy, but for a new kind of man. It is rather as if a nurse had tried a rather bitter food for some years on a baby, and on discovering that it was not suitable, should not throw away the food and ask for a new food, but throw the baby out of window, and ask for a new baby.”

Feb 21 2009 at 1:10am

In order to do econometric research you have to use solid social science reasoning or have a theoretical framework around which to construct your equations.

That is econometrics 101. I just don’t know how you guys managed to make an entire hour long podcast about it.

Economics is a social science. Key word there is social.

Feb 25 2009 at 12:20pm

One major technique for countering bias that the podcast did not discuss is playing devil’s advocate with yourself. Actively try to research the other side’s positions and convince yourself they are correct. Typically they are viewing the world through a different lens than you are, putting more value on some things and less on others. For example, the left wing tends to put less value on efficient markets and economic growth and more value on social justice and equality. Try wearing these goggles for a day try to actually see why THEY think that their arguments are convincing.

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Podcast Episode Highlights
0:36Intro. Truth: How do we know what we know is true? How do we know what we believe to be true is actually true when it comes to economics? Can economics make any claim to being a science. Couch of economic psychoanalysis with bias therapist, Robin Hanson. Monolog. Podcast with David Henderson, conversation about why economists disagree. Making fun of economists. Response: Well, actually the agreement's bigger than you think: micro, incentives, policies: minimum wage, tariffs. What about the areas where we disagree? Response: our studies, data, evidence are better. Robert Frank podcast. More likely to argue that competition will lead to a certain result vs. arguing price discrimination. U. of Chicago, competition vs. imperfect competition. What's the evidence either way? Ian Ayres podcast. Not enough statistical analysis, should use it more. John Lott example, handguns and crime: possibility that citizen has concealed handgun deters criminals. Lo-Jack, device to help you find your car. Ayres and Lott disagree. Why do we accept some empirical work and not others? Ian says: Give me an example of an empirical study that forced you to change your view? Hard to think of a lot of them. Can you think of a sophisticated empirical study, two-stage least squares, instrumental variables, as opposed to facts? Not going to argue that facts, data, don't matter, but that sophisticated empirical analysis is not scientist, but scientism, faith-based economics. Leamer podcast. Any examples of consensus in the field of economics vs. a study that changed that consensus view? Abortion legalization reducing crime study did that somewhat; it's since been rejected. Friedman and Schwartz, A Monetary History of the United States, scholarship, people forced to confront it. Irony: not sophisticated statistical analysis; and it's in macro, the area where people have no consensus. In microeconomics, hard to find examples where studies changed people's minds. Minimum wage: dozens of studies show minimum wage hurts poor people and minorities. Recent years, study by David Card shows minimum wage increases employment. People who liked the minimum wage latched onto that study. But that's one study, vs. 40 or 80 to the contrary. Not good argument, that you have more studies. Maybe Card's study is really the right one. Or maybe all of the studies are flawed. Trying to tease out one policy out of many. Unemployment is low, so obviously minimum wages have an effect, vs. lots of policies at once. Why would you ever be confident enough that you could tease out one thing? Regression tries to hold one thing constant; surely can't control for everything.
14:30Minimum wage: belief based on evidence or just the logic? Virtual couch sitting up. U. of Vermont, Bill McKibben debate on buying local. Mainly empirical arguments vs. logical arguments. Studies not peer-reviewed, not in journals, but often sophisticated. Argument is often: are you kidding? give me half an hour and I'll find an argument against that. Ironically find my own lousy study, or logic. In the eye of the listener, finding a study sounds better. Wal-mart wages study. Logic: wouldn't you think that Wal-mart it would increase the demand for labor and drive up wages? Study: Wal-mart lowered wages but not in small towns. Isn't that even harder to explain empirically? Neo-classical view of the world: supply and demand: in larger cities share would be relatively small, vs. I just looked at the data. Counter-argument: Are you kidding me? Do you really think you've been able to hold constant other things? Not compelling as a counter-argument.
19:32Application: current financial mess and implications for the economy. Symposium at Cato, on Cato Unbound. Larry White: Don't want to use greed because it's always there. Explanation has to do with government's guarantee of Fannie and Freddie, pushing up the demand for housing, bad tax policy pushing up the demand for housing, lowering interest rates pushing up the demand for housing.... Housing bubble, securitization. Brad Delong critiqued Larry's explanation: The timing's been all wrong; just like greed's always been around, Fannie and Freddie have always been around, Community Reinvestment Act (CRA) has always been around, therefore those can't be the cause of the crisis. Ignores that Fannie and Freddie's mission did change around 1995 explicitly to lend more to poor people. Don't want to argue that just because they've existed longer that nothing changed. Magnitudes. At end of Delong's critique:
So why does Larry White's diagnosis of what is going on differ so much from mine? I think that what is going on is a characteristic weakness of the Austrian tradition: the baseline assumption that all evils must have their origin in some form of government misregulation. If government could be drowned in the bathtub, then an Eden in which people indulged in their natural propensity to truck, barter, and exchange would emerge. And this automatically rules out what I regard as the most likely and fruitful road to walk down to understand this financial crisis: the road that starts from investigating how human psychological limits lead to bad private-sector contract design that then magnifies psychological biases.
I am not happy with the state of such explanations--they seem to involve, at the moment, a great deal of handwaving. But in my judgment it is less handwaving than required to make the case that our current financial crisis is the result of our abandonment of a proper gold standard and our embrace of fractional-reserve banking and government-sponsored mortgage lending enterprises.
Poor Larry White, hampered in understanding. Could make same critique of Delong; or Joseph Stiglitz, who in an article in Vanity Fair blames it on deregulation, Glass-Steagal Act, Bush tax cuts and failure by Greenspan to regulate. If we could just get the right regulation an Eden would emerge. So, is there any way to get to the truth about what happened in this financial mess? Both sides try to create an ex-post narrative to explain a single event. Not the best way to do science. Podcasts on the New Deal. Do we just need a really big stimulus package? Paul Krugman? What's the evidence? Very thin. Opposition not empirical but logical: spending on one thing will reduce spending on something else. Crucial policy issue: how much evidence either way, or do sides just talk at each other? Trust, optimism: economics doesn't have much to say about that. Maybe whole system is too complex to manage. Economics may be most useful about what not to do, providing a language for thinking about complex matters in an organized way. As a science, coming up short these days.
28:13Robin Hanson, conversation. Therapist, role is to repeat. In the end, no question here. Sounds like you know the answer but are not very happy with it. Not just random opinions, but correlation here, my side and their side. Debate try to appeal to the data, but it's not very reliable on either side. Theory more powerful when you understand it but listeners don't understand it and other theories exist. What comes out depends on what goes in. Worse: confirms a view that is repugnant, public's view of economists, lay 'em end to end and they don't reach a conclusion. Grading final exams [taping Dec. 17, 2008]; get impression that experts know a lot more than amateurs; answers so confused. Do we as economists know things that non-economists don't? Can we identify some things we agree on? Think we have that. Students before taking class versus after taking the class. Well, you know, the whole economy is just a house of cards, just built on debt. Strange over-reaction to the current situation. Problem is imprudent debt, totally guaranteed debt. Late-night TV, no such thing as risk-free. Two things: 1. Things we understand aren't very useful, don't apply to very much. Like astronomy, pretty pictures but what are you going to do with it? Sometimes applications. 2. Economics has applications but we like to talk about the areas where we disagree. Not giving credit for that. Glass is half-empty but it looks half-full, 7/8 full. Be thankful that we know some things and get listened to, in paper and in government because we know some things, and good when we argue because it shows the border of what we know. People should just listen to us when we don't argue. 3. Third theory: We know a lot about a lot of things, but the process by which these opinions come to public attention is biased by the incentives of that process. Anti-trust trial, both sides could hire lawyers to give compelling arguments even when every economist would agree side A is right and side B is wrong. Expert testimony. Translation from what we know to what matters. Distorting incentives. When something is at stake, can buy opinion, donate money to universities or foundations, or just by staking out a position raise probability of getting a job somewhere in particular, etc. Intensity and animosity in the public form of these debates versus private conversations. People accept physicists except when it's about something the public cares about, like global warming. String theory, get full page coverage. Global warming: evidence, complexity, skepticism perhaps because of money at stake. Topics interesting and matter. If it matters, level of deference goes down unless we are saying what outsiders want to hear.
38:59Continuing on third theory: maybe we could do better, prediction markets--Hanson's own bias! If you are part of this process, if you are one of these people, get money from foundations for points of view, then your perception that your conclusions are well-justified by your data; look at others as biased. If you think people all over academia are allowing themselves to be tempted, you have to ask yourself: Why do I think I'm different? Like to think we'd threaten our relationships with our colleagues or jobs. Niche market. Can't do it more than once. Unless I have some evidence to think I'm more honest, more likely to have rejected these temptations, I'm likely to be affected, too. We humans leak our insincerity. Most of us can't lie very well. If we are in an environment that rewards us for believing something, we have to say we are not as careful and honest as I would have liked. I'm human. Challenge podcast interviewees: Yeah, you are probably right. They back off. You are not going to defend it, versus other times, listeners get upset when interviewees are not hammered. Philosophical note: influenced in college by philosophy profession, Richard Smyth, pragmatism. Charles Peirce. Your grandmother is right: is it okay to do xyz, but why? no answer, it's just wrong; Belief in reason, Descartes. Examine all my beliefs. Benjamin Franklin: "When fortresses and virgins get to talking, the end is in sight." Will eventually come up with a reason ex post, but that reason is not so reliable despite the hubris. Pragmatists argue there is wisdom in the community, not mere superstitions. Hayekian.
48:12Some truth to that; how much? Given some time, can come up with a reason. Academics should be focused on finding reasons for things. Any one person has the reasons in their head; how often should you be aware? Your mind is thinking stuff you are not aware of. If you try to make a computer do things, our mind is doing things we are not aware of. Amazing correlation. Also: other people have other reasoning, and we need to give credit. If I have reasonings in my head, I am not aware how I got from A to B; but also lots of considerations that I don't see. Lots, lots more. Reason to pause. There are clues you can get, but not as easy as you might think. If you in fact gave up something of great value to you because it didn't make sense, it's a red flag that you have some principles or would be honest against the type. Weak clues, don't add up to a lot, but can weigh on your side. Journal article example. If others have same reaction. Various signs of these sorts. Disagree with an influential colleague, etc.--weak signs, everybody wants to feel proud of themselves. Financial mess, idealogue; knowing nothing. Started looking into government's involved, shocked, Arnold Kling podcast; list, some important, some less so. CRA not likely source of the problem. Situation like this: Maybe 75% of each side is a reasonable person. Those people shut up, don't show up on panels, don't get invited to debates. Credit for modesty and inability to decide. Public debate misleading because they select for the confident people. Ideologues on one side or the other, something's going wrong or truth is illusive. Or move to middle position. Economists, thinking people: hard to consistently say "I don't know." Most people do say they don't know. It's the people who have intellect as part of their identity.
58:07Poll: $100 billion stimulus package. People will state an opinion. Any time a pollster asks you for something, you put yourself into the position and answer. Three months later, correlation really low. Prediction markets. Individuals don't have sufficient incentives to be honest. Betting market. New York Times. Congressional compensation: give Congressman a financial stake. What happens to the President sticks to the Congressmen. Clinton rewarded or not for what he did in 1995? Hoover, free-market ideologue reputation, historical legacy; didn't do very well. Bush, non-free market stuff, nice argument for people who want to blame free markets. Why are they doing that? Shows up more in hearings and eventually influences public opinion. If public opinion were very discerning, not a problem. Customer isn't very discerning. Betting markets say: listen to a betting market price. Impulse: encourage people to be skeptical. Could just say no to everything, don't impress friends and relatives. As an ordinary voter, don't affect anything, but can look with-it. Leaves us with ourselves. How important is our own honesty to us? If others out there who care about honesty, where are they and how can we get together or work together? Which is the least Quixotic strategy? Self-referential. Prediction markets versus people becoming skeptical of empirical studies? By definition, all theories are simplistic. Where does it kick in? 1000 people, whole town? Changing hearts and minds is inherently Quixotic.
1:07:43What should we teach our students as economists? Teach anything that is true but is contrary to anything they've ever heard or can read in the newspapers. Show how wrong they can be. Show people who take that lesson to heart too far. Both sides. What should we teach our graduate students? Profession rewards dazzling theoretical brilliance and empirical work. Average graduate students if very tooled up in statistical techniques and profits from using them. Graduate student has to go native, assimilate culture. Mature academic realizes academia might be right place for me but not heaven. Ordinary human skepticism, hard to do as a newbie, or as an oldie. More curmudgeonly with age, world has limits. Easy if we make this the topic of conversation, easy to grant the points, but on something specific, whole conversation fades into the distance, abstract theorizing fades. Suddenly relevant. Should someone keep it in one's mind? Split personality. Fully human, corrected person who stands back and says how right could you be? Is that the right way to be? "My guest today has sort-of been Robin Hanson." On the couch.