From The American Conservative: Our Collective Hatred of Ignorance
In the smartist era, the value or importance of intelligence has never been greater. Yet at the same time, the consequences of naivete and ignorance can be grave. Look how Rick Perry, a three-term governor of America’s second largest economy, was decollated by the punditry after infamously forgetting on live TV the third government agency he would eliminate. The internet has created an indelible, permanent record for everyone, making it nearly impossible to bury past mistakes and transgressions. This transparency and the anaphylaxic reaction to failure and ignorance sometimes has the consequence of suppressing creativity and risk taking, for fear censure and ridicule, and, worst of all, looking dumb when intelligence is becoming increasingly valued in today’s society. While we revere the smart and successful, sometimes we’re quick to heap scorn on those who try and fail or don’t know.
Too much knowledge can create a false sense of confidence in that you think you fully understand a situation when you don’t. One of the pitfalls using the past to predict future is that there are often small or overlooked subtleties that result in completely different outcomes. You can understand 99% percent of the financial crisis and economic history, but that 1% is the difference between making a correct prediction and an incorrect one. Sometimes this is combined with a confirmation bias to skim over the subtleties and only choose the data that agrees with the original hypothesis. In 2009, many commentators and pundits predicted that the stock market and economy would enter a double-dip because that is what happened in the 30’s and conditions seemed similar, so logically we would double-dip. Others drew analogies between the U.S. and Japan in that we would have a ‘lost decade’ or two, because again there were so many historical similarities. Both predictions were wrong.
To the left, the crisis was much sought after retribution or punishment – almost a divine judgment – against the moneyed elite. It was weird to see so many Americans rooting against the very people trying to save the economy, yet it wasn’t too surprising. We argued in vain that this time was really different due to a handful of overlooked factors such as globalization, low regulation, robust consumer spending, a huge rebound in profits & earnings, and the crisis being contained to only a few sectors and that the combination of these factors would prevent a decade-long sump. Even after the recession was declared over, the left’s belief in crisis was unshakable and still is to a large extent five years later.
The Smoot-Hawley Tariff Act of June 1930 raised U.S. tariffs to historically high levels and made the depression worse, but thankfully policy makers didn’t repeat those mistakes, which may have contributed to the faster than expected recovery. In the 30’s, Americans were too shell shocked to return to spending, whereas in 2009 they had no compunction about continuing their old spendthrift ways. While there was long-term weakness and de-leveraging in terms of business lending and low labor force participation, other parts of the economy such as exports, stock market, consumer spending, profits & earnings and consumer credit quickly recovered to new highs. The lesson of the 2008 banking problem is that we can learn from our mistakes of the past to construct better policy today even if we are unable to make accurate predictions.