Friday, September 30, 2011

What We Think We Know

-- Posted by Neil H. Buchanan

I did not plan it this way, but my last two Verdict columns (here and here), and their associated Dorf on Law posts (here and here), had a common theme: challenging the conventional wisdom about certain facts. When John Kenneth Galbraith coined the term "conventional wisdom," he was mostly talking about commonly held beliefs about broad policy questions, not about basic facts. For example, it became the conventional wisdom in the late 1980s that "Reagan ended inflation." That is a highly debatable proposition, but it is not falsifiable in the sense that a simple factual assertion can be checked or falsified. Did the sun rise in the South this morning? Who won last night's game?

Then there are policy-relevant beliefs about facts. What is most interesting is when the evidence simply does not line up with our widely-held beliefs about what the evidence says -- or what it "must certainly" say. Consider four recent examples (starting with the two that I discussed in my columns this month):

(1) Do tax increases harm the economy?

There is a factual inquiry wrapped inside this larger theoretical/empirical question. That is, we will never know with anything close to scientific certainty how various taxes affect economic activity, because of the insurmountable limitations of economic theory and statistical inference. Still, some questions in economics have yielded more reliable answers than others. For example, increases in real GDP seem to increase business investment, especially when the economy is weak. On the other hand, the evidence regarding the effects of immigration on wages is all over the map (in part because our data on immigration are so poor).

On the other hand, we can say as a matter of fact what the state of empirical knowledge is about a given subject, even if that knowledge is unclear. Calling it clear or unclear is itself a statement asserting a fact. That is what I wrote two weeks ago about the effects of taxes on the economy. Whatever the underlying truth of the matter, the evidence supporting the affirmative assertion that moderate tax increases (especially those on the wealthy) harm investment and the economy is "muddled, at best." If the default position is that we should respond to evdience and not supposition, then there is no good reason to believe that the tax increases currently being contemplated should be rejected on the basis of the available evidence.

Of course, one can always take the position that further inquiry will prove what one believes as a prior matter, which is the usual position taken by anti-tax people (when they acknowledge the evidence at all). Erring on the side of caution has its place, but it is still important to know the facts.

When it comes to tax, the fact is that we really do not know very much at all. To listen to much of the political debate, however, one could be forgiven for thinking that the evidence all says that taxes harm the economy, and the only question remaining is where we should fall on the efficiency/equity continuum. In other words, large numbers of people claim that we know something that we do not, in fact, know.

(2) Is Europe suffering from decades of stagnation because of their large governments?

Again, the deep question here is one that will always be contestable, with ever-shifting evidence and new methods of interpretation being offered on a regular basis. That is a good thing, reflecting a healthy academic and scholarly environment. (We can put a pin in the question of just how much a healthy intellectual environment requires funding from non-commercial sources, especially governments.)

We can, however, at least confront a factual presumption that underlies the debate: Are Europe's economies really chronically weak, compared to "free market" economies? Many people seem to think that the answer is unquestionably yes. On one of the listservs that I read, participants debated this question a few months ago. Even the scholarly crowd on that listserv included a lot of people who simply took it as a given that Europe's economies are stagnant and have failed to keep up with the "dynamic" economies elsewhere. The evidence simply does not support that presumption. (I am, of course, setting aside the current euro crisis, which has nothing to do with the discussion here.)

As I wrote on Dorf on Law yesterday, that factual error does not mean that the anti-government crowd is necessarily wrong. They can still claim that Europe's improvement since the seventies was due to the spread of Thatcherism, or that Europe's economies would be stronger still if they would only finish the job of killing off their welfare states. Those arguments strike me as quite weak, given the other evidence that is available, but they are not implausible claims.

The relevant points for today's discussion, however, are that there is a "fact" about the competitiveness of European economies, and that that fact is contrary to most people's presumptions.

(3) Are sunbelt states more economically competitive than Rust Belt states?

Like the debate about Europe's political economy, the argument in the U.S. about regional differences ultimately boils down to a question of the role of government. Those who believe that unions, consumer protections, environmental regulations, income taxes, and so forth are economically harmful like to point to the small-government, right-to-work states as proof that small government is better for the economy.

While this question, too, cannot be finally resolved by social scientists, one fundamental factual presumption has long guided the debate. Southern and western states grow quickly (but remain relatively poor), and midwestern and eastern states are stagnant. Earlier this week, we received news that this is no longer so. Whereas it had been true for several decades that people were chasing the jobs and the weather (and, in the process, reinforcing the job growth), that is no longer true: "Unemployment in the South is now higher than it is in the Northeast and the Midwest, which include Rust Belt states that were struggling even before the recession." Michigan no longer has the highest unemployment rate (behind Nevada and California), and six of the ten other states with the highest unemployment rates are in the south.

Again, this big new fact does not resolve any debates. Those who wish to shrink government will point out that California is, in terms of governance, more like a northeastern state than a sunbelt state. Even so, the new fact is highly relevant. Still, I am willing to predict that this new fact will not penetrate the national consciousness at all. In part, this is a matter of rejecting dissonant evidence. There is also a lot of money lined up to convince people that the evidence points in the anti-government direction (which also helps to explain why the evidence in #1 and #2 above are not widely known).

(4) Is America's obesity problem caused by cheap fast food?

Mark Bittman, the food columnist for The New York Times, wrote a column last Sunday debunking the idea that it is cheaper to eat out at fast food chains than it is to eat at home. This is extremely important evidence, because the conventional wisdom about obesity in America is that poor people have no choice but to eat high-fat, high-calorie diets at fast food chains. The image is of suburban types unloading their organic groceries from their minivans after a trip to Whole Foods, while their poor counterparts settle for Big Macs and supersize sodas.

The underlying story here is an important one. It is apparently true that many poorer communities are not served by the major supermarket chains, and that the fruits and vegetables available in poorer neighborhoods are of low quality. Bitmann reports that "the Department of Agriculture says that more than two million Americans in low-income rural areas live 10 miles or more from a supermarket, and more than five million households without access to cars live more than a half mile from a supermarket." Addressing that issue is important on its own terms.

Still, Bitmann's evidence shatters the myth that poor people eat poorly because they cannot afford to do otherwise. Letters to the editor in response to Bitmann's column pointed out (as Bitmann himself recognized) that "expensive" need not be limited to mere dollars, with travel and preparation (and clean-up) time being precious for those who are lucky enough to have jobs. Even that, however, points to different solutions, which include educating people about how to make good food at home quickly, and making healthy choices easier to prepare.

This might look like a "new fact," but there is no reason to believe that Bitmann happened to gather his facts shortly after a change in the relative prices of store food and fast food. Instead, it appears that people (certainly including me) have simply felt comfortable believing something that is just not true.


One thing I have learned from several years of blogging is that it often seems oddly necessary to say obvious things like "evidence matters." What is interesting about these four examples, I think, is not that "facts are stubborn things" but that "people are stubborn about what they think are facts, even when the facts are falsehoods." And to state something even more obvious: When we make decisions based on incorrect evidence, we just might make mistakes.

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