Industrial Insight

science or control… | January 4, 2013

http://www.realclearmarkets.com/articles/2013/01/04/economists_make_up_a_worsening_story_as_we_go_along_100070.html

January 4, 2013

Economists Make Up a Worsening Story As They Go Along

By Jeffrey Snider

In essence, that is what all this statistical penetration is really about: eliminating tails and curtailing kurtosis by crafting policies and incentives that prevent them from happening. It sounds like a wonderful idea – smoothing out the business cycle, defeating bank panics, making humans more robotic, etc., but it misses the essence of dynamism. Human systems are truly dynamic in that imagination is boundless. While it may seem a worthwhile endeavor to try to banish left tails (the “bad” outliers) in such a truly dynamic system, doing so may actually destroy the good outliers as well. It is a lack of recognition that progress itself is usually not optimal toward the status quo.

We do not know, because there is no way to observe, how human progress and innovation actually occurs. There is much common sense (and even observations) that innovation is actually a creature of failure. We can infer that eliminating failure and creating an “optimal” society would actually be counterproductive because the “science” of statistics is willfully blind to factors beyond its grasp, those same factors that give rise to meaningful advancement. The very upswing of human society, not the least of which was driven by economic progress, is dependent on “tail risks” actually coming true. Real imagination and innovation is, by definition, a tail event itself. Nudging all of society into the narrowness of the Bell Curve is not optimal for anything but debilitating sclerosis.

What’s worse is that all of this is being done in the name of science. The scientific veneer is used as cover for political control in the inarguable trajectory of centralization. Only the priests of statistical knowledge are allowed to define what is “optimal”. Individual preferences are now scientifically proven to be against the Greater Good, and thus the central agency self-delegated to provide an optimal utopia must “nudge” the tail outliers into compliance through all-too-real penalties (that will only increase over time).

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