Fessing up to previously incorrect beliefs

by on August 27, 2010 at 12:11 pm in Economics, Education | Permalink

Brad DeLong offers a list:

In my belief that central banks had the tools, the skill, and the political will to stabilize economies at high levels of employment and low levels of inflation, and thus that fiscal policy and financial institutions policy no longer had any compelling stabilization policy role to play.

In my belief that large, leveraged financial institutions had sufficient caution and sufficient control over their derivatives books that their derivative positions did not pose major systemic risk.

In my belief that the principal threat to the world economy would come from the fact that in a crisis the shaky long-term finances of the U.S. social insurance state might provoke a collapse of confidence in the long-term value of the dollar.

I shared in one and two, though not three.  I'm starting to believe in #3 however.

(That said, I would word #1 differently; for instance, I have long believed in automatic stabilizers and still do and I remain more skeptical of "ramp-up" spending than Brad.  I would phrase #2 to focus on the balance sheet more generally and not derivatives per se.) 

I also take the data on slow median income growth more seriously than I used to.  I no longer think those numbers are a mere statistical artifact.

What can you all cite as changed beliefs?  Examples like "Person X or Policy X turned out to be even worse than I had thought" do not count.

Addendum: Megan McArdle adds her list, mine could be longer too!

1 Justin Martyr August 27, 2010 at 12:25 pm

What can you all cite as changed beliefs? Examples like “Person X or Policy X turned out to be even worse than I had thought” do not count.

Doesn’t that invalidate DeLong’s confession? E.g “Institutions that keep the government from actively intervening in the economy are worse than I thought.”

My biggest changed belief is that the distortionary effect of high taxes is lower than I thought, and my ideological bias is towards smaller government so this really does count.

2 Steve C. August 27, 2010 at 12:35 pm

I never believed that Alan Greenspan was omnipotent. I never believed he was the indispensable man.

I now believe he should have been replaced after the dot com blow up. I’m almost persuaded that the Fed chief should be a one time six year appointment or no more than 2 four year terms.

3 Bill Harshaw August 27, 2010 at 12:44 pm

My belief from the 60’s that 3 or 4 percent inflation was okay if it produced full employment.

My belief from 50’s-70’s that overpopulation and diminishing resources were serious threats.

My belief that China was doomed to decades and decades of poverty.

My belief from the 50’s that the Japanese could only make cheap, imitative goods.

If you’ve lived long enough, you find you have to change or adjust many of your beliefs, though not necessarily your values.

4 Roland August 27, 2010 at 12:55 pm

#2 I really came to believe, after initial skepticism, that there wasn’t a serious mismatch between short-term incentives within a firm (esp., but not only a financial enterprise) and its its long run viability. Of course in the case of financial firms this mismatch had systemic implications..

I really did believe in the great moderation.. We should all now spend a great deal of time reading economic history..

5 Sean Brown August 27, 2010 at 1:04 pm

1) Global warming is a myth or at best a shaky theory.

2) Talent explains more than hard work.

6 Brian Moore August 27, 2010 at 1:23 pm

1) Man-made global warming. Back in like 1992, when the confidence numbers for it were still low, I didn’t think it was likely to be true. Eventually they came up and I had to change my tune.

2. I thought the invasions of Iraq and Afghanistan would have been a lot bloodier. I’m still opposed to the invasion of Iraq, and of our staying in Afghanistan, but I thought they would have been a lot worse.

3. That debates about immigration had been concluded, in pro-immigration’s favor.

7 Jim August 27, 2010 at 1:48 pm

I’m a recovering radian so:
Ratings agencies are a libertarians dream better business beureau proving liberty beats regulation
The vast majority of the finance industry would not be corrupted by the lure of big bonuses
An evangelist for deregulation like ken lay would never betray the cause by screwing a poorly devised implementation

8 Dan H. August 27, 2010 at 1:57 pm

I would take DeLong’s ‘come to Jesus’ moment a little more seriously if all the things on which he changed his mind were not things that confirm his already-held political beliefs. Now if he had said, “I’ve come to believe that the power of government to use broad aggregate measures to understand and manipulate a complex economy efficiently is inherently flawed”, then I might believe that some honest soul-searching took place.

This was kind of like ‘admitting’ that you were wrong, because you once believed your opponents could be partially reasoned with, but now you’re learned that they’re all a bunch of troglodytes.

9 spencer August 27, 2010 at 2:14 pm

I still believe the old depression bromide that the most dangerous thing in the world is a smart banker.

10 azmyth August 27, 2010 at 2:27 pm

I no longer believe in long and variable lags.

11 Nate August 27, 2010 at 2:46 pm

I would second what Mercer said.

12 Dirk August 27, 2010 at 3:10 pm

I am astonished by McArdle’s list! I never thought she would admit being wrong about anything. My opinion of her has risen today.

13 Tomasz Wegrzanowski August 27, 2010 at 3:12 pm

I once strongly believed that people rapidly get dumber as they age past their peak in 20s, but now I think that Flynn effect, lowered motivation, less free time, and lag between discovery and its impact explain pretty much all data, without requiring reduction in intelligence.

14 not_scottbot August 27, 2010 at 3:19 pm

DeLong changed his mind on letting torturers retain tenure – sadly, he didn’t do it out of principle (no tenure for torturers is an easily defended principle), and he did it opposed to the original reason he supported tenure for torturers (without a criminal conviction, tenure should not be removed in such a case).

Actually, DeLong changing his mind is not the surprise – him actually keeping to any principle (apart from naked self-interest) long enough for anyone to think he has principles would be the surprise.

My mistake, long ago, was actually thinking Delong had any principles at all.

15 Lord August 27, 2010 at 3:43 pm

1 certainly, and I wouldn’t have believed the reversion to failed beliefs of the past without seeing it with my own eyes.
2 not so much, though I did think Wall Street would have known better than to eat its own cooking. That the end buyers were going to be in trouble was never in doubt, just the magnitude.
3 no, though at some point creditors will realize we aren’t a good investment, we will still be better than anywhere else. I was too optimistic on the euro which will never be what the dollar is, but nothing will.
4 will substantial real growth return in a decade? I still believe so, but I don’t believe I will still believe that when and if it does.

16 TW Andrews August 27, 2010 at 3:50 pm

I still believe that ultimately it is bad to try and socialize the gains from private enterprise, however, I no longer believe that we have the social or political will to privatize losses as well as gains.

17 Bill August 27, 2010 at 4:19 pm

Henry, You have a sin of bad manners that reflects poorly on you.

18 Six Ounces August 27, 2010 at 4:25 pm

I ate lunch yesterday at a San Francisco restaurant called “Credo.” The walls were filled with quotes from famous people beginning with “I believe…”

Some were inspirational. Some were pithy. Some were abhorrent, and some were damned funny.

19 Ed August 27, 2010 at 5:03 pm

The recent election in Australia corrected one of my beliefs.

Australia has had the most extreme two party system outside the United States. Minor parties exist in Australia and have some impact, but until 2010 none ever won a seat in their House of Representatives in a general election (though there is a small party in permanent coalition with the Liberals, which doesn’t really count).

So I thought a hung parliament in Australia was pretty much impossible, since it would have taken either an exact tie between the Coalition and Labor in terms of seats, or a minor party actually winning a seat. Well, in this election Coalition and Labor came close to a tie in terms of seats -there is a dispute about whether one of the newly elected MPs supports the Coalition- and a minor party won a seat. And we got a hung parliament.

I also thought the prospect of a Presidential candidate winning the popular vote and losing in the Electoral College in the US, while not impossible, was extremely unlikely, but it happened in my lifetime.

20 Paul Zrimsek August 27, 2010 at 5:30 pm

I know that the stimulus is only half the size of the one those worthies wanted. I’m just looking at the apparent effect of the one they did get and figuring that twice zero is still zero.

21 Mark August 27, 2010 at 6:05 pm

Too many to mention but I thought….
(1) people who said “Iraq = Vietnam” were simply stupid/crazy.
(2) Iraq had WMDs. I thought the Iraq war would be short. etc etc… painfully etc.
(3) Obama would do something about underwater mortgages
(4) it was impossible for California to have 10+% unemployment for any appreciable length of time unless major world event (as in huge war/epidemic/revolutions…)

More to my own field:
(1) there would be a significant increase in successful drug development for disease, including some big wins (by 2010).
(2) (as of 2007) that even in 2010, I was sure that sequencing a human genome would be relatively expensive (>$200K).
(3) that people in my lab would care about getting results because either (a) they would be curious or (b) they would want to move ahead in their careers (as opposed to (c) because they just want a paycheck)
(4) that the scientific workforce at my university would just be slightly worse than available in major US cities
(5) that NIH funding levels would stay at their 2001 rates

22 Steve Sailer August 27, 2010 at 7:11 pm

Shorter DeLong: I’ve only been wrong about things I’m right about now.

23 dearieme August 27, 2010 at 7:38 pm

How come I can read Megan’s list here but it doesn’t show up on her blog when I visit it?

24 Yancey Ward August 27, 2010 at 8:18 pm

Some comments just stand out- Greg Ransom +1, Andrew +1, Paul Zrimsek +1.

My biggest mistake was ever reading DeLong in the first place. Ask me again next year, and I might add Krugman to the list.

25 BKarn August 28, 2010 at 3:52 am

I previously believed most regular posters on this blog were actually fairly objective and educated. A thread like this is wildly revealing.

26 Andrew August 28, 2010 at 6:42 am

Tyler is just early with the puts on Treasurys.

Treasury rates are low BECAUSE there is (going to be) a huge demand for cash. It is interesting times.

27 Josh Fulton August 29, 2010 at 8:28 am

How can you teach at George Mason if you believe in the kind of interventionism expressed in #1?

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