Saturday, November 10, 2012

Pondering the Implausible: Conspiracy Skepticism and the Slothful Induction

If you believe a lie then learn you’ve been lied to, you feel betrayed, embarrassed and angry. Maybe you’re not the shrewd operator, after all. Maybe you’re just a chump.

This realization produces a discomfort that psychologists call cognitive dissonance. It happens when a person holds beliefs that are incompatible, as in “I am a shrewd operator” and “I’ve been chumped.” A wave of cognitive dissonance is washing over the U. S. electorate, as voters face up to their chumpdom.

The electorate is seeing that political and economic fundamentals rest on something other than which party perches on the branches of the U.S. government. Wings left and right fly in and out of office, but election wins of neither camp deflect entrenched trajectories:
  • The wealthy grow disproportionately wealthier and the workaday blokes correspondingly poorer.
  • U.S. troops and their private-sector surrogates occupy more foreign turf.  
  • Our sources of sustenance become increasingly adulterated.
My friends who navigate the evening news from the cargo bay of the left-right circus-train explain away the immunity of these trends to election results. Like UFO cultists whose deadline for the messianic rescue has come and gone, they circle the wagons tighter. It was a fluke, they say--the next time our team wins, that’s when things will change.

Fortunately, self-deception has its limits. 


Philosopher of science Thomas Kuhn found in the history of science examples of self-deception's limits, and he described what happens when those limits are breached.  In The Structure of Scientific Revolutions, Kuhn pointed out that when scientific experiments produce unexpected results, and eventually they will, then scientists explain away the anomalies, somehow or other, to preserve their foundational beliefs, what Kuhn called their paradigm. Scientists accommodate the anomalous results by amending the paradigm. In the above example, if “I am a shrewd operator” is the prevailing paradigm, and “I’ve been chumped” is an anomalous occurrence, then “I must have had a bad day” might be an adequate amendment to accommodate the anomalous data while preserving the paradigm.

But a paradigm can be stretched only so far. Eventually the anomalies, such as strings of coincidences or runs of bad days, accumulate beyond the elastic threshold of the paradigm, and it snaps. When that happens, the paradigm’s adherents convert or, eventually, die off, and a new generation adopts a new paradigm that accommodates the anomalous data.

The Structure of Political Revolutions. 


Politics, like science, rests on foundational beliefs, or paradigms. A majority of the electorate, for example, seems to believe that the ruling class comprises more or less decent human beings who act in good faith (more or less) toward the ruled. But when outcomes contradict this belief, when its expectations are not met, then the electorate stretches the paradigm to accommodate apparent acts of bad faith, such as, for example, a pile of broken campaign promises. 

A generally accepted amendment grants that our elected officials and their advisers are beneficent actors who act in good faith but are stupid. (This is the honest-but-stupid hypothesis.) Maybe they make big mistakes, because deep down they are boobs, or, more charitably, they just lack sufficient smarts to figure out how to keep their promises. The economy, the Middle East, the environment—it’s all so complicated. Sometimes things go wrong. The rulers mean well, but they bungle. Dang. Or, maybe they’re honest, well meaning and competent, but cowardly when opposed. (This variant is the honest-but-spineless hypothesis.)

Armed with these amendments, adherents of the prevailing paradigm can mitigate the dissonance created by anomalous outcomes. They can still gather and console themselves under the old paradigm. But the paradigm must have an elastic threshold; it cannot accommodate an infinite number of anomalous outcomes and amendments.

Beyond that threshold lies a revolution in thought, namely a new paradigm that is commensurable with the anomalous data. And it is this: The rulers are dishonest and smart. That’s it. OK, and cold-blooded. This is the realpolitik hypothesis. This is the one that turns the unexpected outcomes into expected ones and demotes the electorate to chumpdom. This hypothesis does not amend the paradigm; it overturns it.


Let’s see which hypothesis the data support.


Honest bumblers, we should expect, will produce results in a normal distribution around a target.  That is, if we’re dealing with honest bumblers, then outcomes should not be skewed in any particular direction from the target. That target, ostensibly, for political leaders consists in seeing the greatest good enjoyed by the greatest number of their constituents. This means that more or less beneficent politicians would try to enact and enforce policies that directly or indirectly satisfy the greatest number of their constituents’ needs and wants. “Markets,” fiscal policies, and so on have value only insofar as they serve this end.

Consider the performance of the U.S. economy during the past five years. The variances from the target are not random. They are not distributed equally in all directions from the target.  Rather, they are skewed conspicuously in the direction of greatest good for a very small number of people. Trends in wealth and income distribution in the United States undermine the honest-but-stupid hypothesis. Mere bumbling or spinelessness would not produce the wealth and income distributions that we see.

A nonrandom distribution, when a random one is expected, doesn’t necessarily uncover a shortcoming in the prevailing paradigm or a conspiracy. Anomalous results might be a quirk of coincidence.  But how many support beams have to align before you concede that the pile of rubble is only apparently rubble, that it conceals an architecture? 

Let’s see how many decisions, or support beams, had to dovetail, or align, to reduce the U.S. economy to the rubble pile that it is today.

An essential innovation was the 401K “revolution,” which sucked money out of its secure place in pension funds and deposited it in risky equity markets, under the guise of letting us manage our own retirements. And President Clinton had to sign the Financial Services Modernization Act, in 1999, which tore down the wall that had separated commercial and investment banks. And the banks had to securitize the subprime mortgages that they were manufacturing and invent bizarre new packages of derivatives to hide the toxic junk. And  President Clinton’s economic advisor Larry Summers, Secretary of the Treasury Robert Rubin, and Federal Reserve Chairman Alan Greenspan had to work overtime to dissuade Congress from heeding a minor bureaucrat, Brooksley Born, who warned against the dangers of the newly created, unregulated, opaque instruments (great PBS Frontline investigation here: -- you can’t help but wonder what these guys knew about the contents of the opaque instruments that made them so desperate to conceal those contents from the public.) And Fed Chairman Greenspan, and Ben Bernanke after him, had to keep interest rates anomalously low for a long time. And Congress had to pass legislation forcing banks to underwrite mortgages for people who didn't qualify. And the Bush White House egged everyone on with its cheerleading slogan, "The Ownership Society." Along the way, Congress and the Bush administration made bankruptcy laws more stringent, as if girding for a wave. And the ratings agencies, such as Moody's and Standard & Poor's, had to give triple-A ratings to all the toxic junk. And the SEC had to turn a blind eye to all the bogus ratings. Fannie Mae and Freddie Mac, for their part, at the same time had to abandon their competencies and/or scruples and securitize more subprimes. All of this set the stage for the Fed, Wall Street, and the bureaucrats in charge of the U.S. Treasury to loot the Treasury to cover the bankers' bad calls, protecting them from the risks of their leveraged investments and dropping the burden on the taxpayer. And the Obama administration, once most of the dust had settled, and it became clear what had happened, had to ignore the blatant fraud committed by the Wall Street banks, including the rampant robo-signing of thousands of mortgage agreements.  Let us be grateful that President George W. Bush failed to privatize Social Security, that is, to suck the Social Security trust fund into the equities market, or that too would have been gifted to the upper circles.

The Left-Right constituency seems to imagine that politicians and their financiers WANT to raise the standard of living for the middle and lower classes. They seem to imagine that incompetence and/or spinelessness by SHEER COINCIDENCE happens always to further enrich the wealthy and impoverish the poor. Given the above sequence of events, it is implausible that we are dealing with independent actors who were more or less aiming for the target but happened coincidentally all to miss the mark in ways that happened to align perfectly to create the debacle of 2008. The data support the dishonest-and-smart hypothesis with ample room for cold bloodedness.

To conclude otherwise is to commit the logical fallacy of slothful induction. The number of decisions made by the various actors to produce the wealth, income and debt distributions that we see precludes the actors’ decisions happening by coincidence to merely appear coordinated. We are living through an economic recession that the upper circles manufactured with engineering precision.

Psychologists say that you can relieve the pain of cognitive dissonance in a couple of ways. In our original example, you can accept the provisional title of chump, brush yourself off and carry on with a new understanding. Or you can recommit yourself to the original belief. This is called being in denial.

But maybe that’s the best attitude after all. Just take our lumps. After all, the ultra-rich insist that the best thing for the rest of us is austerity. 

But they are wrong. The best thing for all of us is prosperity, which we would have, given the efficiencies brought to nearly every human enterprise by the technological revolution of the past thirty years and which revolves largely around the integrated circuit. This revolution has pushed operational efficiencies off the charts. We all should be living like millionaires, thanks to the integrated circuit.

BTW, austerity looks like this:

But the economic leverage that the new technology provides has not effectively trickled down nor raised all boats, because the miserly practitioners of finance capitalism extract the advantage from the productive economy and store it in unproductive mattresses in Switzerland and the Cayman Islands.

Class warfare, packaged as fiscally responsible austerity, morphs in the end into mass detention. What more austere environment is there than a concentration camp? And we’ll let ourselves be herded into them so long as the herding is accompanied by soothing bromides about markets and freedom.

Here’s another mountain of coincidences, presented in a more entertaining style than I could muster.

Beware the slothful induction, and fear not chumpdom.

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