Thursday, November 24, 2005

The benign metaphysics of Ms. Baum

While reading Ms. Baum's latest views, which strike me more as demagoguery than argument, it becomes quite clear that one of us will look the fool in the medium term. I think the key distinction in the articulation of the opposing views, rather than the substance of the arguments, is that I am aware of this possibility. One of the reasons I am so dogmatic about inserting "in my view" or "as I see things" in my writing is to remind both myself and all 3 of my readers that my views are just views. Views are much easier to change when new facts come to one's awareness or old facts are seen in a new light than an accepted metaphysics. As Aristotle noted, it is the mark of an educated mind to be able to entertain an idea without accepting it.

To which elements do I refer when I sense more demagoguery than argument? Take her description of Safehaven website, a site I've enjoyed for many years, as a place "where fantasy and reality mix" or the liberal peppering of "conspiracy theory" throughout the essay as examples. Methinks she reads the site with closed mind. Intriguingly, she holds up as as "far-out" a view which is as unfounded as hers, that of Robert McHugh. This isn't to dispute his view, but merely to suggest that ultimately, "why" the Fed chose to drop M3 reporting will be seen in light of their future actions. Mr. McHugh may be correct or Ms. Baum may prove correct, but neither is correct now, the experiment has yet to run its course.

I chuckled a bit reading her newest essay in light of my last post. While in my chosen world view, exposed in my last post, judgments about events can change as their effects become clearer, in my read of Ms. Baum's world, judgments quickly become unalterable truth. Notice how quickly she concludes; "
So while the discontinuation of a series [M3] very few people pay attention to may have been a surprise, it was not nefarious. Nor was it a prelude to a massive, secretive money-printing operation on the part of the Fed, which is how the hard-core conspiracy theorists are playing it. " Perhaps that will prove to be true and perhaps not. I'll wait to see what happens in the first year of no M3 data before jumping to any conclusions.

As a general proposition, it seems to me that the more data presented to investors, the more likely can those investors draw reasoned conclusions about the corporation in question, be that corporation the Fed, GE or Enron. By the same token, the less data presented the less likely can investors draw reasoned conclusions. I wouldn't go so far as to argue that less data always means something is being hidden but rather that something might be being hidden. The Bank of Thailand spent the first half of 1997 delaying the release of current account data, a choice which later came to be seen, in the aftermath of the Asian Crisis, as nefarious. Who knows, maybe the Fed is earnest about their reasons for terminating the series. Of course, if the US finds it harder to finance its deficits and resorts to monetizing debt, the resultant inflation will likely lead people to view that policy choice as a poor one. The intent of the Fed won't matter in the post hoc analysis, only the effects.

2 comments:

ransford said...

Anyone who believes that a significant change in the way the government, or a quasi-government agency, reports economic statistics is benign has not been paying attention. CPI has been distorted downward by several changes in the last decades to look good and to keep social security and other payment down. GDP has been distorted upward to make the administration look good. And employment statistics are distorted by fictitious hirings by fictitious small businesses. Now the Fed terminates an important, albeit modestly useful, measure of the liquidity it is creating at the same time Bernanke proposes increased transparency for the Fed (although I don't understand how a fuzzy target – inflation – qualifies as "transparent").
I think the issue is "conspiracy." There is a big difference between a legal conspiracy, where a group gets together and consciously plans a crime and what we might call an "implied" conspiracy where a large group of people act in concert through a meeting of the minds rather than a physical meeting to act in their own interests and against the interests of others. It seems to me that there is a money and power grabbag out there enjoyed by financial institutions, brokers, CEO's, boards of directors, directors of the NYSE, U.S. presidents and vice presidents, along with their lesser minions that is funded by the rest of the population, which is simply getting further and further in debt to make these thieves richer. I think that representation deserves the name "conspiracy." You can merely call it an oligarchy, I don't care. It just ain't what I envision as "democracy."

Dude said...

To be fair to Ms. Baum, she does not take the view that all government data is accurate, note this recent essay on the silliness of current inflation data. I think the issue with respect to many mainstream economic commentators is that in the absence of a big problem the benefit of the doubt is a given. All of the "minor" distortions in reporting are seen as outliers to the fundamental strength of the system.