Bad Arguments vs Bad Faith Arguments

There is a bit of an argument between Scott Sumner and Jason Smith, its a couple months old because I saw it and filed it away somewhere to be used later because I think it illustrates a point. The post is an argument about the sequestration and macroeconomics; read it if you want to.

I’m not really going to comment on the post itself, but on a single sentence of it, which reads “Now that Sumner is on his way to Mercatus, I can only assume it will get worse.”

Mercatus, for those of you who don’t know, is “world’s premier university source for market-oriented ideas—bridging the gap between academic ideas and real-world problems.” Its a libertarian/market oriented think tank located at George Mason University, and is funded in part by none other than the Koch brothers.

So, if I parse the argument from Jason Smith correctly, its that Scott Sumner is dishonest in his opinions, but going to the Koch funded Mercatus center will only make it worse; which on a quick read kind of makes sense, but if you examine it closely, it really doesn’t.

A bad argument is one that is wrong. If I believe that the moon is a hologram and argued so because stuff like this happens, then I would be making a bad argument. If I didn’t believe that the moon is a hologram, but argued that it was anyway, I’d be making a bad faith argument. Bad arguments can be harmful, but the problem is that its impossible to tell a bad argument from a good argument until after you’ve examined it. They’re a necessary evil, after all, many “bad” arguments can turn into good ones after years of examination.

A bad faith argument is different, and they can be more harmful. The Koch brothers, for instance, own large interests in logging companies, one can make a case that they would therefore profit from denying global warming, and that the profit motive, not their actual belief, is partially driving the debate.

Now, why might this be a bigger problem than other arguments? Countering a bad faith argument with evidence will never work, as he was is arguing in bad faith will only ever change when the underlying incentives for arguing in bad faith change (in the global warming case above, the profit motive, but there can be other causes). Whereas if people were simply arguing because of what they believe, then as soon as the weight of evidence changes, people will change their mind. (ding ding ding ding! most naive thing I’ve ever written on this blog award goes to… the previous sentence!). The one arguing badly in good faith can still present ideas which may be missed otherwise or prove a testing ground for good theories, while the arguer in bad faith will twist arguments and attempt to confuse rather than illuminate ideas.

Looking at the original statement in this lens, its pretty clear that Jason Smith is arguing that Scott Sumner will be arguing in bad faith (if he isn’t already). That because not only his opinions but also his economic well being depend on agreeing with market based though, he will compromise himself and his scholarship.

But this can’t be right; if it were it’d essentially be saying that studying with people you argee with or taking a job to advocate a position is inherently bad faith. A logical extension would mean that any environmental activist would be arguing in bad faith so long as they worked for a environmental organization, which in effect would by saying that we can’t trust the sierra club when the speak about preserving the environment, because they only care about preserving the environment. The same principle holds true for the Mercatus center, should we not trust them with regards to market based solutions, because they only care about market based solutions?

One could argue that its the Koch influence which is the problem, and that Mercatus is only a mouth-piece for Koch industries. (I doubt that it is, but at least that’s a plausible story). This may hold true for Mercatus issues in general, but not in macroeconomics. The Kochs may lose if people decide to stop cutting down trees, but nobody wins because of a recession. If the Kochs are backing Scott Sumner for their own selfish reasons, well that just means they think NGDP targeting will prevent recessions/cause growth, and if that’s true that everybody should be for it. If its false, everybody, including Koch brothers, should be against it.

Of course there are differences in opinion on controversial issues, (that’s pretty much a tautology if I’ve ever seen one), and maybe the Kochs are right about NGDP targeting (or maybe they just fell that the Mercatus center is doing good work in general and are happy to help fund it), maybe they’re wrong. But regardless, so long as neither they nor Dr. Sumner are arguing because of a hidden incentive then they’re simply part of the debate. We can’t commit to evaluating only good arguments, because we can’t tell if an argument is good or not until after we evaluate it.

Paul vs the World

What then shall we say? That the law is sin? By no means! Yet if it had not been for the law, I would not have known sin. For I would not have known what it is to covet if the law had not said, “You shall not covet.” But sin,seizing an opportunity through the commandment, produced in me all kinds of covetousness. For apart from the law, sin lies dead. I was once alive apart from the law, but when the commandment came, sin came alive and I died.10 The very commandment that promised life proved to be death to me. 11 For sin, seizing an opportunity through the commandment, deceived me and through it killed me.

I’ve heard a few explanations for this passage. The first and most obvious is that the law creates in us rebellion, we want something simply because we are forbidden it. This does relate, but I think that Paul is talking about something different as well.

When we examine the law, certainly the law as Paul the Pharisee would have observed it was horribly hard to follow. Look at how much of first few books of the Bible are laws; laws which are expected to be followed. Yet how much harder is it for us Christians, who commit murder whenever we are angry, and adultery whenever we are lustful.

What was Paul’s sin? Well, for starters he was a murderer; executing those he believed to be heretics and blasphemers. What led him to this? Adherence to the law. He identified worth as following the law, and those he felt broke it (namely Christians) were worthy of death.
We look to the law for morality, look to achieve goodness by following code; and we fail. We then look to justify ourselves, to prove that our failures do not make us worthless. So we look around, and see the sins of others. We see other failing, putting themselves ahead of others, being thoughtless and careless and oh so unholy. And then we try to justify ourselves by comparing ourselves to others, by judging them, and by deciding that their sins are the truly bad ones while ours are merely minor indiscretions. We look to other’s sins, and decide we are holy not just because we don’t commit them, but because we are actively working protesting those sins. This leads us nowhere though, we are still surrounded and convicted by our own sin; the more we become obsessed with sin, the more we become aware of it and the more we need to justify ourselves by comparing ourselves to others.

I can summarize this in one sentence; Paul made an idol of the law. He didn’t seek to follow the law, he sought to worship it. In worshiping the law instead of the law-giver, he perverted the law. Its not so much that he broke the law as that he broke himself upon the law.

Looking to ourselves to fulfill the law is a losing battle, in best case scenario we give up and live with imperfection. In worse case scenario, we become monstrously evil, picketing funerals with “God Hates Fags” signs.

I wrote a while ago about sin from Heaven’s perspective. Consider this essay sin from Earth’s perspective, attempting to avoid sin leads us to become sinful, hating sin leads us to hate and eventually destroy ourselves.  Our world cannot handle sin, it corrodes in the worst way; both embracing sin and struggling against it lead to the same place, becoming hateful, hurtful and demonic.  As great as the evils committed by those who seek only to enrich themselves, aren’t the evils much worse of those trying to fix the world?   The very nature of socialism is to fix some evil in the world, to provide for the poor and to ensure equality among all.  Yet look at the monstrous ways this can be enacted: decimation of political oppositions, gulags, the Stasi, re-education, the millions dead in the Great Leap Forward.  Look at the evil committed in the name of God: the Crusades, the treatment of homosexuals, even Paul’s aforementioned .  Look at the Crucifixion, it wasn’t the Romans who wanted Jesus dead, it was the Sanhedrin.  I could go on and on about the truly evil people in the world thinking they were good.

This is why we need Jesus; we are sinners.  The more we struggle against sin, the more it ensnares us.  But in embracing Jesus, in looking to Him to fix us, in praying that God should replace our sinful nature with a better nature, we can win against sin, we can become a reflection of God’s perfection.  Not a projection, but a foreshadowing of the Kingdom of Heaven.  When we embrace Jesus, we look to work not just for God, but with God, and we learn to imitate Jesus.

Jesus did, on occasion, get angry and started flipping over tables, for there are times we should be angry.  But for the most part, Jesus was meek.  Surely in dying on the cross he was the master of practicing what he preached, turning the other cheek times 1000.  Paul asks the Church at Corinth, why not rather be wronged?  Surely, nobody has ever been a better follower of that passage than Jesus, wronged not just by Pilate and Herod and Judas but by Peter who denied him and by James and John who were not even able to stay awake for him; yet instead of destroying those who crucified him, he asked that the “Father, forgive them, for they do not know what they are doing.”  This is not just our model, it is our method as well, God will not just forgive our sins, he will help us overcome them as well.

Why I’m not a Keynesian

After world war II, the decline in government spending was enormous. Government spending as a percent of GDP went from over 45% to around 15%, which threw the US into a terrible recession, where GDP fell by over 12% in 8 short months. To put this in perspective, the “Great Recession” which lasted from 2007 to 2009, and which was the second worse recessions in the drop of GDP since WWII, only saw GDP decline by 4.3%.

This recession saw unemployment skyrocket to 5.2%. The average person was hurt by this, in 1946, while the GDP in 1946 fell by 11.6%, personal consumption grew by a paltry 12.4%, to put that in perspective it was the 85th worse year since 1930 (source: http://www.bea.gov//national/nipaweb/DownSS2.asp).

So what actually happened? We see that the decline in government defense spending after World War II caused the measured GDP to fall a lot, but what this meant is that the government stopped building tanks, aircraft carriers, rifles and ammunition. This meant that the US “produced” a lot less in 1946 than it did in 1945 or 1944, but that production was for military purposes only. While this created a recession, it was a recession on paper only. If you haven’t noticed, that 85th worse year for personal consumption growth? Out of a period of 85 years, (ie, the best).

The decline in one sector of GDP (government spending) was great enough to cause GDP to significantly retract (worse year for GDP since the great depression), but it did not make other sectors of GDP fall. In fact, not only did personal consumption have its best year eve (or since 1930 when the BEA statistics start), so did Gross Private Domestic Investment (same source as above). Unemployment did increase, but not to a very high level (we’ve seen a steady fall in unemployment for 6 years, but we’re still above the 5.2% immediate post war peak). Basically, the idea that the end of the war would throw the US back into depression was wrong, the only fall in GDP was only a reduction in anti-Nazi spending. Its a bit like saying that the best measure of a person’s economic well being is his consumption spending. And that in year 2, when he was healthy, he spent significantly less than in year 1, when he was fighting cancer. It was good that he was able to spend money fighting cancer in year 1 no doubt, but it was better that he didn’t have cancer in year 2.

If we’re to tell the story more, the drop in government defense spending allowed resources to be dedicated to other areas, such as business investment, new home construction, and creation of consumer goods. But this this the opposite of what is supposed to happen according to Keynesian economics. The fall in government spending is supposed to depress incomes in general, as all the soldiers return home and the tank builders are laid off, the total demand for goods and services wil fall, causing GDP to fall, not just in terms of fewer tanks and rifles, but everything else as well. This didn’t happen.

Now, this may not be the best case. You can argue that the proper Keynesian government level was still much lower in the war than actual government spending, or that the special circumstances dominate in immediate aftermath of the war.

More recently, we saw two major changes in government spending in the past 8 years. The first was the stimulus bill of 2009, which was supposed to jolt us to recovery and keep unemployment below 8%. The second was the sequestration, which, due to the Republican preference for lower government spending and political fighting about the debt limit, caused government spending to be reduced (and taxes to raise, both of which are considered anti-stimulative effects by Keynesians). Let’s look at how this effected the economy:

GDP Growth 2009 to present

Unemployment 2009 to present

It looks to me like government spending had little to no effect on GDP growth, and unemployment looks totally unaffected. It went up during the recession and a little bit afterwards, and has fallen consistently since, regardless of what the government tries to do.

This is my biggest complaint against Keynesian economics, or I guess fiscal stimulus to be specific. We had an $831 billion government program, and nothing to show for it. The Keynesian economist can make the case that things would have been worse without the stimulus or better without the sequester, that’s certainly a possibility and I don’t want to dismiss it. But I do think that the burden of proof should be on the people proposing trillion dollar expenditures. And I don’t think that the burden of proof was at all met. This is the strongest case I have against fiscal stimuli, they have enormous costs and very unclear benefits.

None of this is a counter to the idea that we shouldn’t have government spending.  There are many great things that government has provided, including roads, schools, police.  To return to the World War II example, we basically prevented a madman from conquering the world, which is a worthy a goal as there can be.  But what I am arguing against is the idea that government spending by itself typically stimulates the economy; the idea that we’re better off having the government hire people to do useless things.

There may be instances when this is true, that simply borrowing and spending money by the government can counteract a bad economic environment.  But as of right now, I’m convinced that it’s probably not true generally (ie, that any bad economic environment can be improved by the government spending more money), and that we can’t distinguish the instances where government spending helps from when it hurts or has minimal effect.

Insider Trading is Stealing

Over at econlib, Charles Hooper argues that insider trading doesn’t really hurt anyone. Insider trading instead is a victimless crime, and is in fact beneficial.

His argument goes like the following:

In the market for any given stock, there are “uninformed buyers” and “uniformed sellers.” That is, people who buy and sell stock but without inside information. In his example he uses the case of something very good happening to a company soon. The number of uninformed buyers (or technically the shares which uniformed buyers buy) will equal the number of uniformed sellers (with the same technicality).

The uniformed seller is hurt because he does not reap the rewards of the good news, but remember this is before any insider trading occurs, so it can’t be said he is hurt by insider trading.

Then, and insider comes along, buys a number of shares, and profits from the good news, making a large sum of money after the news is made public. Mr. Hooper asks who is hurt from this? Certainly not the uniformed seller, because he was going to sell anyway. The person most hurt is the uniformed buyer, who loses on the opportunity. Yet the uniformed buyer has no real claim to the potential benefits, after all, the buyers can’t complain that the “Insider snatched Uninformed Buyer’s dumb-luck windfall”.

There is one fatal flaw in the argument: Mr. Hooper seems to believe that any increase in the number of buyers will be offset by an equal decrease in buyers. But there are two ways that an increase in buys can effect the market, it can “crowd out” other buyers, or it can cause more people to sell, most likely some mix of the two. For various reasons, I think that the effect would be more sellers rather than fewer other buyers, but all we need to establish is that some of the effect of buying shares is encouraging others to sell them.

Now, we see the problem. The insider, an employee and agent of the shareholder, is transacting with the shareholder, using the knowledge that they gained only through being an employee against the shareholder. That is simply wrong.

Let’s clarify with an example: lets say that three friends pool their money to form an oil exploration company, hoping to find the next big well. One of them runs the company (being an engineer and all), and gets paid a salary, but the three friends split all profits evenly. They go a long time without finding any oil, and all three are discouraged. Then, one day, it becomes very evident that they are about to strike oil; but only to the one running the company. Instead of telling his co-investors about it, he instead offers to buy up their shares.

We can argue about ethics and why this is or isn’t ethical; but those discussions go nowhere. Instead, lets talk about economics. Each outside investor knows that, whenever they transact with insider, they can expect to lose. If they sell their shares to the insider, well they can bet that they’re on the verge of hitting oil. And if the insider offers to sell his shares, then they can be certain that the wells are dry (or that the expected find won’t pan out). Basically, the outsiders have one rule if they don’t want to get screwed: never transact with the insider. This of course hurts the insider, why shouldn’t he be allowed to sell to his co-investors if he needs the money, or buy if he has a windfall he wants to invest? In fact, we can see that the insider is worse off in this example than the outsiders (assuming they have jobs which pay the same), they can transact with each other (buying to invest, selling shares in order to consume), assuming their counterpart wants to do the opposite. But the insider can never transact, nobody will every buy from him or sell to him.

How do we fix this? Simple, make it a law that says that the insider can’t transact based on knowledge that he has that the outsiders don’t; the outsiders will now be willing to sell, knowing that they are protected if the insider has material nonpublic information. Thus, the insider now has the same privileges as the outsiders, and (in our simplified example), everybody is better off (they all have more potential trading partners) and nobody is worse off – clearly a pareto improvement.

But lets imagine a twist to the scenario. Instead of buying the shares directly from the outsiders, the insider sets up a shell company to purchase the shares from the outsiders, the outsiders have no way of knowing that the company is really owned by the insider. Is this ethical? I certainly don’t think so, all the shareholders put their trust in the insider that he would act in their best interests; keeping all potential upside is certainly not within their interests.

Lets use a third example. Same company, same three friends. They strike oil in a well which is expected to produce 100 barrels a day. Instead, it produces 120 barrels a day. The insider decides to take the extra 20 barrels and sell them himself (whether he does this buy selling them through the company and then embezzling the money or physically diverting the 20 barrels a day is unimportant). Is this action ethical? No – it is stealing. But it’s really the same action as above – using insider information (in this case the number of barrels being produced) in a manner against the best interests of the shareholder. How is this any different from insider trading – finding the extra 20 barrels a day, and then offering a price to the other shareholders based off of 100 barrels a day. In fact, it can be shown that the economic impact is exactly the same- the outsiders get the net present value of the sale of 100 bpd split evenly while the insider gets the net present value of the 20 bpd entirely to himself.

Now, you may argue that this doesn’t apply to the situation of the market as a whole; after all transactions on the stock market are much more anonymous. But this doesn’t make it better, it makes it worse. There is (typically) no way of knowing who you are buying shares from; so the insider who buys shares using material nonpublic information would be as if the insider in our above example set up a shell company to buy shares from the other investors. They would sell without ever even knowing that they were selling to the business partner. I can’t see how any of this is ethical, it is currently illegal and should remain so.

Keeping up With the Carcosians

Things used to be so much better, right? Whether its movies, or music, or books, all the good pieces of art have already been created, and we’re left with the bottom of the barrel.

Is this really true though? Movies are a non-starter, they have declined in quality in all levels except the number of explosions or some such nonsense. Music is an interesting question, which I may tackle at some point; I would say yes music has declined, but a: it’s arguable, and b: I’m not versed enough to really comment. Books and visual arts I’ll ignore. Video games are so new that its not really an interesting question – do we really want to compare video games of today to video games of 1990?

That leaves TV. Has TV declined in quality? I think the answer is absolutely, probably more than even movies. So called “reality” programs have taken over every channel, what started as an interesting idea (MTVs the real world), has moved into competitions which could be interesting (Survivor), now it is only talent shows (the cream of the crop, btw), way past their prime contest shows (I had to check, but apparently Big Brother is still on!), staged TV shows featuring some obscure occupation (Storage Wars, Pawn Stars), a whole genre of television which seems to do nothing but exploit rednecks (albeit with their enthusiastic consent), (Duck Dynasty, Swamp Loggers, Axe Men), and worst of all, celebrity worship of the worst kind of people who I can’t really figure out how they became celebrities in the first place (anything with the word Kardashian in the title). That is the majority of TV, and I think it is borderline frightful. Sitcoms are largely horribly stale, doubly so for network dramas, which seem to consist entirely of crime procedurals (CBS currently has CSI, NCIS, NCIS: Los Angeles, and NCIS: New Orleans, not to mention Criminal Minds (a procedural with a slightly different twist!) and Blue Bloods (although to be fair, I can’t really comment on Blue Bloods because I’ve only seen part of it while doing laundry once).

Of course, you protest now. What about Mad Men? Breaking Bad? True Detective? Other new show?

IMDB ranks tv shows by voting, and while I’m hesitant to give those rankings too much credence, you have to get all the way to number 19 before you get an American TV show that wasn’t made primarily in the 2000s. Just about any list of great tv dramas will be dominated by those TV shows which have come out on cable, within the past 15 years, which are serial in nature (so you are expected to watch all episodes in sequence), and which don’t typically have to conform to censors or worry about network reputations. (Of course, not all lists agree. Some lists recognize that perfection in TV was only reached by Season 2 of Murphy Brown)

To answer the question of whether TV has gotten better or worse, we really have to define the question. Has the average TV show gotten better? Have the best TV shows gotten better? Has the average TV show, when adjusted for ratings (ie, the average TV show that people watch), gotten better?

Two things stand out to me in regards to this, the first is that the cause of the greatness is the same cause of the mediocrity. We now have hundreds of choices in entertainment at any given time (during classic TV, the option was 3 to entertain and 1 to educate). Networks had to target the average viewer because specialist programs just wouldn’t work, you couldn’t afford to waste a valuable time slot on something that wasn’t proven, and you couldn’t risk making a show which 10% of everyone thought was great, but 90% of everyone would find offensive.

That changed, now instead of the making tv shows for average viewer, TV shows are nothing but specialist programs. With fifty channels, if you have something that 5% of everyone likes, then you’ve got a chance at winning the time slot; at least in cable anyway. This fragmentation leads to what the cultural critics call “appealing to the lowest common denominator,” although what it really means is that every network is going to be making trash. It means that a cable network can make a show entirely about the Kardashians and it will find an audience, if most people are disgusted by it, who cares?

But it also means that the same system which can afford to produce TV shows that you don’t need a brain to enjoy can also make TV shows which are challenging, complex and engrossing. They can make the TV show which gets weird or maybe just violent. The release from the control of the big three networks has made TV more diverse, dumber on average but more intelligent at its peak.

One other thing to note is that there is a similarity between all the great shows which have come out of cable in the past 15 years, and that is they are almost entirely dramas. While there have been some comedies which people love recently, (30 Rock, Parks and Rec, Arrested Development, The Office), I think the pale when compared to the number and quality of dramas. If you ask people what the best TV drama of all time is, my guess is you’ll get a lot of Sopranos, Breaking Bad, The Wire, and Mad Men (not coincidentally, I wrote up that list, then decided to Google it to at least get somebody else’s opinion on it. The first link I clicked, here:  (and the first hit on Google), had those as the top four). You won’t get too many people saying that Hill Street Blues or ER.

If you go the other way, and ask what the best TV comedy of all time was, my gut feeling is that you’ll get a lot of people saying I Love Lucy, All in the Family, M*A*S*H, Cheers, The Cosby Show, Seinfeld, and Friends. First, we should questions whether my statement is true, you can argue that the office, Curb Your Enthusiasm, Arrested Development, 30 Rock etc are funnier than anything that has come before them. Comedy is more subjective than drama though, what one person finds hilarious is what another finds merely amusing and while these may be the funniest shows on now (or recently), they’re not the most popular. Two and a Half Men and the Big Bang Theory are the most popular sitcoms, and as far as I know they’re not terribly well liked by the critics. Seinfeld was not only the funniest show of its time, but the most popular comedy as well. Same with Cheers and I Love Lucy.

I think a big reason we don’t have the funny, popular sitcom is that humor is, much more than drama, a social reaction. We not only like to watch comedies, but we like to watch them with other people. Drama takes us to a place we’d never experience; a whether it’s a meth lab in New Mexico or Carcosa, comedy takes us to a place we’re totally familiar with – a parking garage or a Chinese restaurant. To be dramatic, you must be unusual, to be funny, universal. Becoming more splintered as a society we don’t have that common connection anymore, or at the very least the artists of today can’t exploit the fragmenting of cable TV to create a comedy which reaches everyone. That is why we seem to be getting more and better dramas while comedies seem to be moving along at a much slower pace.