Tuesday, March 25, 2008

Why Touting Conventional Wisdom Pays Off, Even When You're Wrong

Krugman writes:
Reading some of today’s news, it suddenly struck me: we’re living in the age of the anti-Cassandra.

Cassandra had the gift of prophecy — she saw, correctly, what was coming — but was under a curse: nobody would believe her.

Today, our public discourse is dominated by people who have been wrong about everything — but are still, mysteriously, treated as men of wisdom, whose judgments should be believed. Those who were actually right about the major issues of the day can’t get a word in edgewise.

What set me off was the matter of Alan Greenspan; as Dean Baker like to remind us, news analyses of the housing and financial crisis almost always draw exclusively on “experts” who first insisted that there wasn’t a housing bubble, then insisted that the financial consequences of the bubble’s bursting would remain “contained.”

It’s even worse, of course, on the matter of Iraq: just about every one of the panels convened to discuss the lessons of five disastrous years consisted solely of men and women who cheered the idiocy on.

Now, none of this is entirely new. Consider what Keynes said in 1931:

A sound banker, alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional way along with his fellows, so that no one can really blame him.

Still, it seems especially extreme now. And think of the incentive effects. What’s the point of taking the risk of challenging conventional wisdom if, even after you’re proved right, only the guys who were wrong get invited to opine on Charlie Rose?

To which Alex Tabarok responds:
I think the fact is correct so what is going on?

The answer is media incentives. It wasn't just the experts who were wrong, the majority of the American people got Iraq and housing wrong. The war was popular in the beginning and people continued to buy houses even as prices rose ever higher. So what does the American public want to hear now?

The public wants to hear why they weren't idiots. And who better to explain to the public why they weren't idiots than experts who also got it wrong?

Henry Farrell, in response to Tabarok, also chimes in:
It’s an interesting argument, but one that I’m highly skeptical about. One of the golden rules of survey research is that questions that ask about the political views that respondents held in the past are likely to get highly inaccurate replies. The reason is that people’s memories are quite malleable, so that they often reshape their recollections of what views they held in the past so that they accord better with the views that they hold today. I’d be prepared to bet a significant amount of money that the number of people who believe that they supported the war back in 2003 is far lower than the number of people who actually did support the war back in 2003. Indeed, I suspect that the number of people who believe that they supported the war back in 2003 is a minority of the US public. Since the Cassandra-backlash effect that Tabarrok is talking about is contemporaneous, and presumably depends on people’s current beliefs about what they thought in the past, this makes me think that something else is going here (and that this something else has to do with the desire of elite actors in the commentariat to hold onto their privileged position in the public discourse).

No comments: