Monday, September 13, 2010

Things that are hard to convey

A problem I have had for a long time, is trying to explain something that is counter intuitive to a hostile audience.

This comes up from time to time. It is even hard to explain something counter intuitive to a sympathetic audience if they are not already aware of the phenomena.

A couple of examples of this are things would be this, a variation of the Monty Hall Paradox, and Quantum Mechanics.

Recently a couple of topics have come up that I find to have this characteristic: Conversations on the effects of the Stimulus, and Climate Change.

First on economics. I will be the first to admit that I am no master of economic theory, but I do understand aggregate effects. So I can understand why Dr. Krugman may be pulling out his hair over the general dialog with regards to "counter cyclical" spending (Stimulus), especially how public opinion rarely coincides with the proper action. He returns to the topic many, many, many times.

Whenever the issue of fiscal stimulus comes up, you can count on someone chiming in to say, “Only a moron could believe that the answer to a problem created by too much debt is to create even more debt.” It sounds plausible — but it misses the key point: there’s a fallacy of composition here. When everyone tries to pay off debt at the same time, the result is contraction and deflation, which ends up making the debt problem worse even if nominal debt falls. On the other hand, a strong fiscal stimulus, by expanding the economy and creating moderate inflation, can actually help resolve debt problems.
In particular Dr. Krugman is obliquely referencing what is known as the Paradox of thrift.
The idea that an individual action when multiplied over a large group worsens the status of the group as a whole.

Ezra Klein chimes in here as well, just to show how mainstream some of these economic ideas are.

On the environmental front this piece, is an interesting read. What do you do, when there is a very tangible immediate benefit, but the consequences are safely in the future, so that those who reap the benefits never have to pay the consequences associated with those actions?

So in short, I was just stricken by how pervasive this is. No matter the proof you bring to bare, it runs headlong into the inability of people to understand aggregate effects.

-Cheers

No comments: