The Skeptical Optimist

My second-favorite nonfiction book

Here's a book you should know about; I've been giving it a real workout for quite a while: A World of Ideas, by Chris Rohmann. 

Ever wonder what "progressivism," "conservatism," "libertarianism," or "empiricism" really mean?  When I do, this is where I begin.  It's in dictionary format, well cross-referenced, full of concise summaries; a great starting point for further research if you're so inclined. 

Here are a few snippets from a few of those concise summaries, selected by me, not quite at random...

...from the Adam Smith entry:

"A country that produces the goods it can grow or manufacture most efficiently, and imports the rest, can give its own consumers a greater freedom of choice, thus increasing the national standard of living."

...from the Karl Marx entry:

"Where previous social reformers had attributed social inequality to the unequal distribution of wealth, Marx rooted it in the exploitative relations of production."

...from the John Maynard Keynes entry:

"Like classical economists and their modern heirs, Keynesians believe that a continuous flow of investment into the economy increases both consumption and production.  However, they do not believe this happens purely through market forces..."

...from the Supply-side economics entry:

"It disputes the demand-side approach of Keynesian economists, who see growth as tied to the aggregate demand for finished goods and services, stimulated when necessary by government incentives.... [Supply-siders argue that,] as tax rates rise, taking an ever-greater proportion of income, people will respond by decreasing their productive effort and thus decreasing the tax base available to the government.... Tax reductions in the United States [in the 1980s], called 'Reaganomics,' stimulated an economic boom, but critics claimed that this reflected not supply-side but demand-side effects: output rose in response to increased consumer spending as the tax cuts generated higher disposable incomes."

And, last but not least, my favorite entry of all...

Skepticism:

"...the word comes from the Greek for 'consideration' or 'doubt.'  Skepticism takes two main forms: the belief that no position is certain (including, as is frequently noted, this position) and the view that truth exists but that certain knowledge of it may be beyond our grasp."

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Almost forgot.  If you're wondering what my favorite nonfiction book is, it can be found here.

How I’m preparing for the presidential campaign

With eighteen months to go in the presidential campaign, I decided to procure a survival manual, which I’ll use liberally, not conservatively, as the political rhetoric heats up.  The survival manual in question is an excellent little book about how not to get fooled by fallacious or manipulative reasoning.  The book is Nonsense: A Handbook of Logical Fallacies, by Robert J. Gula.  At nine dollars, it’s a bargain. 

Emotional language, propaganda, diversion, and evasion are not the proper tools for critical thinking and scientific discovery; when unaccompanied by sufficient evidence and reason, they are nonsense.  They do, however, work effectively for persuasion and manipulation.  Why?  Because, as Gula points out early in the book, critical thinking and analysis is difficult; it’s a lot easier for us to trust others who share our already-chosen ideology and who talk as if they’ve already done the hard work for us.  Here’s the quotation he chose for the beginning of his chapter on logical fallacies; it’s from Thackeray’s novel, Vanity Fair:

Always to be right, always to trample forward, and never to doubt, are these not the great qualities with which dullness takes the lead in the world?

If you get a copy of Gula’s book, you’ll be equipped to sort out and categorize most of the nonsense we’ll be hearing for the next year and a half.  A few examples:
• “Cut spending or raise taxes” = false dilemma;
• “Tancredo is a xenophobe” = personal attack;
• “Thousands of scientists agree that humans are causing global warming” = appeal to the bandwagon;
• “Global warming is really a global, left-wing political movement” = hasty generalization;
• “Ethanol subsidies and tariffs promote energy independence” = diversionary appeal to the Iowa caucus voters;
• “The debt is 9 trillion and growing” = appeal to large numbers without context;
• “Foreigners own more than half of our federal debt” = appeal to fear, glittering generality, and outright falsehood. 

Those are just a few examples.  Developing the ability and agility to categorize the nonsense talk as fast as it comes at us—from all directions—is like getting good at counting cards at the blackjack table, or at swinging the mallet in whack-a-mole.  For the upcoming presidential campaign, I intend to be skillful with the mallet, and Nonsense is the playbook I’ll use to polish my reflexes.  I hope I'm not alone; our politicians deserve to get better questions than they've become accustomed to. 

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End notes:

1: A concise summary of logical fallacies is on the web: Stephen Downes Guide to the Logical Fallacies.  It’s one of my most-clicked bookmarks, a good quick-reference to have at hand—in addition to Gula’s book above.

2: Although manipulation is always undesirable, persuasive tools and techniques can frequently yield beneficial results—if and when they complement sufficient evidence, reason, and critical thinking. 

3: I'm like everyone else: imperfect at the processes of critical thinking.  I'm almost always thinking about it, however. 

The Global Warming Mystery

Although there are still a few scientists who think the planet will be cooling soon, there's a huge and growing body of evidence that the temperature is headed in the opposite direction: up.  If it is, the next questions are, in this order:

• Why is the globe warming?
• What should we do about it?

My interest in science doesn’t mean I’m an expert in climate science, so I have to rely on the evidence and arguments of others before I can draw any informed conclusions.  I do believe that our technological capabilities will be a big factor in the solution, as I mentioned in this energy article—but before we can commit to a solution path, it would be a big help to know why the globe is warming, wouldn’t it? 

A large number of people already have their minds made up; not only are they convinced they know “why,” but they also know “what we should do about it”: we humans are causing it, and the solution is centrally planned and enforced controls on the human activity and technologies that cause it.  That message is getting such wide coverage, I wouldn’t be surprised if a majority of the general public agreed with it. 

But if there is a majority, it doesn’t include me yet.  Reason: I’m not so sure the “Why” question is settled.  In fact, in the mainstream media, I think I’m detecting something Thomas Jefferson warned about:

The moment a person forms a theory, his imagination sees in every object only the traits which favor that theory.

The famous physicist and Nobel laureate Richard P. Feynman gave us a similar admonishment:

For a successful technology, reality must take precedence over public relations, for nature cannot be fooled.

Scientific truths are not determined by popular vote or opinion polls.  They are determined by testing theories against observations.  The book depicted at the top of this article has an interesting title, and an even more interesting subtitle: Unstoppable Global Warming: Every 1,500 Years , by S. Fred Singer and Dennis T. Avery.  I’m only partway through it, but wanted to get this posted in case you wanted to see a plausible alternative to the “greenhouse” theory for explaining why the planet is warming: the 1,500-year climate cycle, discovered recently by three European scientists (Willi Dansgaard, Hans Oeschger, and Claude Lorius).  Here’s the opening paragraph:

The earth is warming, but physical evidence from around the world tells us that human-emitted CO2 (carbon dioxide) has played only a minor role in it.  Instead, the mild warming seems to be part of a natural 1,500-year climate cycle (plus or minus 500 years) that goes back at least one million years.

I’m going to withhold judgment on the “Why” question; I need to see the rest of the evidence and arguments in this book.  Until we know why the globe is warming, we won’t know what to do about it.  (Example of an unanswered question: Is increased CO2 causing the globe to warm, or is the naturally warming globe causing CO2 levels to rise?)  When I see new evidence and theories like the one this book lays out, I become a bit more skeptical about the “greenhouse” theory to which so many others have already committed.  As the authors say, if it’s really the 1,500-year cycle that’s causing the warming . . .

. . . then public policy must focus instead on adaptations—such as efficient air conditioning and building dikes around low-lying areas like Bangladesh. 

Seems to me the 1500-year cycle theory should be getting more exposure and debate time from those truly interested in “settling the science.”  Maybe this new book will help liven up the discussion. 

Eyes-free reading: Highly recommended

I bought an iPod Shuffle, and after just a few days, I’m hooked—even though I haven’t downloaded song number one yet.  Come to think of it, I might never download any music to it.  Reason: I’d rather listen to Russ Roberts interview Milton Friedman while I’m outside walking, or driving to the store.  It’s eyes-free reading, using a little device that clips onto my shirt, and it’s a great new invention.   [What'll they think of next?]

I’m quickly finding out there’s a podcast (mp3 file) on just about any subject I’d like to hear about; iTunes (for the PC) makes it easy to pack a lot of them onto the device.  Looks like I’m about two years behind the leading edge on the podcast front—but it was the convenient, very-small size of the new device that got me over the hump. 

In case you’re interested, here are my two favorites so far:

• The Political Economy of Power – if nothing else, listen to this one for sure.

• Milton Friedman on Money – very informative summary by the man himself.

Several other good ones are available at this page.   

That’s it.  Just passing on a “new” discovery.

Get ready for a big surprise

Conventional wisdom tells us that: (1) the vast majority of US households have experienced no increase in real income for more than a quarter century; (2) real wages have been stagnant for that same period; (3) low-wage burger-flippers have replaced high-paid factory jobs; (4) only the top one percent or ten percent have benefited significantly from rising productivity or asset prices; and (5) the once-robust middle class has been shrinking. 

Just about everybody treats those assertions as if they are facts.  That includes politicians on both sides, talking-head partisans, economics correspondents, and columnists—many with undisguised or thinly-veiled political agendas.  They are supposed to be the experts, and the masses (like me) have to trust them; after all, our busy lives permit us only a limited amount of time for paying attention to politicians and the press.  When the experts are nearly unanimous, that’s a good signal that the five conventional wisdom assertions have to be true . . . isn’t it? 

That brings us to the big surprise, which Alan Reynolds sums up clearly and concisely: “Not one of those statements is even remotely close to being true.”   

This book (Income and Wealth, by Alan Reynolds) is one of the best debunkings of conventional wisdom I’ve come across in a decade.  It is a step-by-step dismantling of conventional wisdom about income and wealth distribution.  Alan Reynolds does it methodically, one point at a time—using direct quotes from people who make those assertions, clear logic explaining what’s wrong or misleading about those assertions, and facts and figures from easily-checkable references to official, government-published sources (such as the Statistical Abstract of the United States, the Bureau of Economic Analysis, and the Bureau of Labor Statistics). 

Why, then, do so many people seem to accept the false conventional wisdom without question?  I have a guess: Each of us likes to think the person we heard it from must have done their homework; otherwise they wouldn’t be talking like that.  Let’s face it, assumptions like that save us a lot of work.  In this case, however, I now realize that, by trusting conventional wisdom, I was being too lazy—and I strongly suspect that most of our country’s so-called “economics correspondents” are guilty of the same thing I was. 

I am thankful that Alan Reynolds is one who actually did the homework on this subject, then wrote a book laying out his findings.  His attitude is one we should all adopt: “I accept nothing as an article of faith.  I want to hear the logic and see the evidence.  And you should demand nothing less.  In the absence of logic and evidence, you should not give a hoot about my opinion.  Reality is not a matter of opinion.” 

And I’ll steal one more passage from his book:

“No matter what one thinks ought to be done about taxes, spending, unions, immigration, minimum wage laws, and so on, the first thing that needs to be done is to get the facts right.  If that happens, there will still be plenty of room for lively debates about all sorts of public policies.  And they will be honest debates.”

This book will always be within an arm’s reach of my workstation.  I highly recommend it, especially to anyone thinking about writing on the subject of income or wealth “distribution” in the United States of America. 

Get this book, and get ready for a big surprise. 

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End note: This is the book review I promised a while back.  I also posted it to Amazon.com, and so far, Alan's new book is averaging five stars. 

Income and Wealth, by Alan Reynolds

I've known for months that this book was in the publisher's hands, and it's finally out: Income and Wealth, by Alan Reynolds. 

Income distribution is the topic that invariably comes up in tandem with "economic growth"—but I've been holding off commenting much about the distribution question until I could get my hands on this book.

Alan Reynolds is one of my favorite authors, because he deals in facts and logic, not political agendas (visible or hidden).  Especially when the topic is economics, that's like finding a diamond in the rough.  I'm almost halfway through the book, and it's every bit as good as I'd hoped and expected.  I'll write a summary after I finish, but I wanted to get this recommendation up now, in case you're running short on reading material.  In my opinion, it is worth every dollar. 

If you're expecting confirmation of the gloomy conclusions typically derived from statistics about income distribution, you are in for a big surprise.  In any case, I couldn't resist pulling the following quote out of his Introduction, because it summarizes what I like best about Alan Reynolds:

I accept nothing as an article of faith.  I want to hear the logic and see the evidence.  And you should demand nothing less.  In the absence of logic and evidence you should not give a hoot about my opinion.  Reality is not a matter of opinion.

More later, after I've finished reading it.

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[Full disclosure: 1: He lists my blog in the appendix. 2: If you and one other person each buy the book by clicking through the link above, I will make enough money from Amazon to go to Starbucks and buy a medium regular coffee if Republicans retain a majority, or a small coffee plus a donation to my personal tax-hike-abatement fund if Democrats achieve a majority.]

Read This Book

I just finished this book (The Origin of Wealth by Eric Beinhocker), and it is one of the best I’ve ever laid my hands on.  Although economists set in their ways will find discomfort in its challenge to their worldviews (neoclassical, neo-Keynesian, take your pick), it will be a page-turner for anyone else—especially anyone who has a background in science or engineering, although that’s definitely not a prerequisite. 

The economy is a stubborn thing that does not behave the way the equations say it should—regardless of which economists’ equations we’re talking about, and regardless how many centuries they’ve spent developing the deterministic models.  Instead, the economy is a complex adaptive system, always evolving (or trying to evolve) to a higher state of order. 

If you only read two chapters, pick chapters 3 and 4.  Chapter 3 summarizes the critique of conventional economics’ assumptions and so-called axioms; as at the end of the Wizard of Oz, it is an unveiling of the man behind the curtain.  Chapter 4 introduces the new paradigm, using agents in computer simulations to demonstrate how complex economies evolve from scratch in an environment with just a few simple rules and survival motives.  After you read chapter 4, I predict you won’t want to stop reading. 

The future is nowhere near as predictable as deterministic equations and models would suggest.  That’s why there’s a better way to prepare for a better future than predicting, committing, and planning.  The better way is to experiment, learn, and adapt; to try a whole lot of new, different things, each one in a little way; i.e., to adopt the "Thomas Edison" approach.  All it takes to discover a paradigm-shift technology is just one success out of all those many little experiments—and there’s no way of knowing ahead of time which of those many experiments will succeed. 

A few years ago, my company was experimenting with a few large customers on a new idea for doing business together.  Early on, we had many disappointments; I described the process as follows:

“We’ve been trying a lot of things that don’t work.  That’s encouraging, because the faster we do that, the sooner we’ll run out of things that don’t work.”

Experiment, learn, and adapt.  That’s how (not just) economies evolve faster and better.  The more favorable the environment for that process, the faster the economy evolves to a higher order. 

I’ll be talking more about that process in the next few articles (coming soon) of my series on energy.

The Truth About the National Debt

Remember the early-to-mid 1990s?  Republicans were using the “obscene” national debt to make political hay against the Democrats, who held the White House. 

Now reread the previous sentence. 

Okay, now—just for fun—swap the words “Republicans” and “Democrats,” and change the verbs to present tense.  Voila!  It’s now a 2006 sentence! 

Funny how that works, isn’t it?  Politics is so, so predictable. 

Do you know anybody who could use a good dose of the truth about the national debt?  Truth that, believe it or not, is completely unaffected by which party occupies the White House?  If so, read this concise little gem of a book, pictured below, and you’ll be more than ready for the demagogues and sloganeers, regardless of their party affiliation.  It was written ten years ago by Francis X. Cavanaugh, an economist who had been responsible for debt management policy at the Treasury Department, under several administrations.  The book’s relevance has only increased since its publication in 1996. 

Here’s a link to it at Amazon.com.  [Full disclosure: I’ll make forty cents if you buy it from that link; to sidestep that, go to Amazon and search for ISBN 087584734X.]

Only nine bucks for one hundred-fifty pages of concisely-written myth debunkings.  That’s six cents a page; sheesh, what a bargain.

Here are two excerpt from chapter 9, "Why the Myths Persist"; click to enlarge.

Clip 1:


Clip 2:

By the way, many thanks to reader Wayne Floyd, who sent me an email asking me for some book recommendations.  As I was making the list for him, I pulled Cavanaugh's book down off the shelf, enjoyed some deja-vu as I skimmed my ten-year-old highlights—then wrote the author a belated thank-you letter.  Lastly, an added bonus: I finally located the source for the Milton Friedman quote I used in the article I wrote last year titled “What’s so scary about debt held by foreigners?”.  Friedman’s quote is on page 73 of Cavanaugh’s book.  Here it is again, this time properly cited using Cavanaugh’s end notes:

It is a mystery to me why... it is regarded as a sign of Japanese strength and American weakness that the Japanese find it more attractive to invest in the U.S. than Japan.  Surely it is precisely the reverse - a sign of U.S. strength and Japanese weakness.
—Milton Friedman, “Why the Twin Deficits Are a Blessing,” Wall Street journal, Feb. 14, 1988, A18.

Get the book and read it.  [After that, if you’re interested in the single, minor exception I took with his conclusion, let me know and I’ll send you the relevant portion of my letter to him.]

2020: Gloom-merchant-extinction year

I’ve been working my way through Ray Kurzweil’s 500-page book, The Singularity is Near, for several weeks.  Today, I watched a 75-minute presentation by Ray Kurzweil, ending with a Q&A session, given at the Council on Foreign Relations on 11/30/05 (four weeks ago).  The presentation is an excellent summary of the book, by the author himself.   

My summary of his summary: Our technological capability, both information and nano, is growing exponentially—and the exponent itself is growing.  We’ve now reached the knee of the curve, and will be going near-vertical very soon.  The year 2020 will be a key milestone in human history.  In short, the doomsters are doomed.  Fourteen years to go; I can hardly wait.

If your schedule can more easily accommodate listening to a 75-minute audio (or reading its transcript) than reading a 500-page book, I strongly recommend following one of the links below.  Listen to Ray Kurzweil tell you about it himself:

• The (mp3) audio file is on this page.

• The transcript is on this page.

TiVo owners should check CSPAN-2’s schedule (program: Book TV), to view this presentation by Kurzweil; he shows several excellent charts from his book, illustrating his point about exponential growth.  (Those charts don't come through very well in an audio file.  Duh.)

Goodbye, Peter Drucker

The "father of management" and one of my favorite authors, Peter Drucker, died Friday just before turning 96.  He was appropriately described as "the 20th century's most influential philosopher" in this excellently written obituary in the Financial Express; go read all of it. 

Drucker was the source for many entries in my favorite quotes file—and I wasn'€™t even finished transcribing all the underlining I've done in his books over the years.  If you'€™ve never read anything of his, I strongly suggest fixing that problem.  A good start is a recent book, The Daily Drucker, consisting of 366 different snippets from his past writings.  Go to Amazon, or your favorite bookstore, and get it. 

Here are a few Drucker gems from my file...

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I am not an economist—€”something I have known since, in 1934 as a young economist in a London merchant bank, I sat in the John Maynard Keynes seminar in Cambridge, I suddenly realized that Keynes was interested in the behavior of commodities, while I was interested in the behavior of people.
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I am not only willing but insist that in all political and social decisions the economic costs are calculated and taken into account.  To talk only of "benefits" I consider irresponsible and bound to lead to disaster.  And I believe in free markets, having seen far too much of the alternative.
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Management will remain a basic and dominant institution perhaps as long as Western civilization itself survives. . . Management is the organ of society specifically charged with making resources productive, that is, with the responsibility for organized economic advance.
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Joseph Schumpeter insisted that innovation is the very essence of economics and most certainly of a modern economy. . . In the economy of change and innovation, a profit, in contrast to Karl Marx's theory, is not a "surplus value" stolen from the workers.  On the contrary, it is the only source of jobs for workers and of labor income.  The theory of economic development shows that no one except the innovator makes a genuine "profit"; and the innovator's profit is always quite short-lived.
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For me the tension between the need for continuity and the need for innovation and change was central to society and civilization.
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I am one of many who will miss him.