Friday, May 3, 2013

On Economics and Truth

griftopia, Matt Taibbi, corruption, greed, power, book, financial collapse
He calls Goldman Sachs a "vampire squid"
by Ben Howard

Earlier this week I picked up the book Griftopia by Rolling Stone columnist Matt Taibbi. I'm fascinated by the merger of politics and high finance especially in light of the 2008 financial crisis and Taibbi does a great job of laying out a chain of events that lead to this economic collapse as well as pointing out those responsible.

It's the kind of book that's really fun to read if you like being angry and disillusioned for 200 pages, which in the case of this book, I didn't mind. But this isn't about whether or not Griftopia is a good book, this is about truth.

Taibbi's work is filled with all sorts of interesting and provocative explanations for the financial crisis in 2008, alongside explanations for rising oil prices and the real, non-political motivations for health care reform. However, I remain skeptical of many of his findings for two primary reasons.

First, he's connecting the dots in order to paint a predetermined picture. This is entirely reasonable since he is trying to defend his central thesis of Power + Greed = Corruption, but it also sparks a natural skepticism in my mind. 

Second, occasionally Taibbi says things that are factual, but not quite true.

For instance, in a section about healthcare reform Taibbi makes a passing reference to higher rates of infant mortality in the United States than in other developed nations. This is true, but it's also true that doctors in the United States attempt more invasive, high-risk procedures to save at-risk births. Additionally, children who pass away after living for a few days are counted towards the infant mortality rate in the United States while other countries only count children who don't live 24 hours.

His statement is factually true, but the reason it's true has nothing to do with poor health care. In fact, it's true for the opposite reason, the doctors are better at attempting to save babies in distress.

This is a commonly accepted piece of evidence in favor of health care reform, but it isn't quite true. And the fact that it's true(ish) makes me wonder about the bigger connections Taibbi makes throughout his book.

preacher, sermon, preaching, pastor, minister
Good try, sir
This situation reminds me of something very familiar. Something that's been a part of my life since the day I was born. It reminds me of sermons.

This is how I relate to sermons. It doesn't matter if the message in question is good or bad, if it's delivered well or poorly. It doesn't even matter if I agree with the point being made; a healthy dose of skepticism is always present. In fact, I'm skeptical for the same reasons I'm skeptical of Taibbi's conclusions (even though I want to agree with him).

Not only are sermons by their very function geared towards reinforcing faith that forms their basic foundation, they're also full of those little illustrations and bits of information that sound good, but aren't quite true.

It's the preacher who uses Greek, but the translation isn't quite accurate; or quotes someone famous, except that person didn't say that line; or tells a well-known story, except that it's apocryphal.

These aren't lies. This isn't about lying at all. It's about those times when the truth is fuzzy, or when things said as facts turn out to be wrong.

One of the most influential economic studies of recent years was written by two economists Carmen Reinhart and Kenneth Rogoff. Their study argues that a country begins to experience a severe slowing in economic growth when it's debt to GDP ratio exceeds 90%, a number that the United States is slightly above. The study has been used by countries the world over, as well as by Congressional leaders in the U.S. and it's one of the studies behind the big push to get the national debt under control.

The only problem? It's wrong.

Two weeks ago, it was announced that a 28-year old graduate student named Thomas Herndon, while trying to recreate the study for a class project, had stumbled upon a simple error in the Excel spreadsheet of the two economists which rendered their findings incorrect.

Reinhart and Rogoff, Thomas Herndon, excel, spreadsheet, economics, math is hard
Thomas Herndon, champ.
Math is hard.

I'm fascinated by this idea of fuzzy truth, of truths hidden away by perfectly reasonable and believable fictions. So what happens when we find out that something we believed to be true is wrong? Not a lie, not a fabrication, no ill intent, just mistaken.

How do we define truth in the midst of skepticism? Should I believe Taibbi's conclusions are correct even if a few of his facts aren't? Should I believe the preacher's sermon even when he says something I know isn't accurate? What about the about the scientist or the economist with cold, hard facts?

How can we tell what's true and what's true...ish?


Ben Howard is an accidental iconoclast and generally curious individual living in Nashville, Tennessee. He is also the editor-in-chief of On Pop Theology and an avid fan of waving at strangers for no reason. You can follow him on Twitter @BenHoward87. 

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