Tyler Cowen’s three laws

by on April 15, 2015 at 9:55 am in Economics, Law, Philosophy | Permalink

Many of you have been asking for a canonical statement of what I sometimes refer to as Cowen’s Laws.  Here goes:

1. Cowen’s First Law: There is something wrong with everything (by which I mean there are few decisive or knockdown articles or arguments, and furthermore until you have found the major flaws in an argument, you do not understand it).

2. Cowen’s Second Law: There is a literature on everything.

3. Cowen’s Third Law: All propositions about real interest rates are wrong.

I coined those some time ago, when teaching macroeconomics, yet I remain amazed how often I see blog posts which violate all three laws within the span of a few paragraphs.

There is of course a common thread to all three laws, namely you should not have too much confidence in your own judgment.

Addendum: Kevin Drum comments.

1 Bruce Cleaver April 15, 2015 at 9:58 am

“There is something wrong with everything”. I like it! But, applying Cowen’s First Law to itself yields….what?

2 Urstoff April 15, 2015 at 10:10 am

Cowen’s Fourth Law: There are no laws.

3 Eli April 15, 2015 at 10:15 am

It’s really the Third Law that is self-defeating.

4 dan1111 April 15, 2015 at 11:55 am

Heh. +1

5 Sigivald April 15, 2015 at 5:48 pm

I was going to say that, but …

“All propositions about real interest rates are wrong.”

Is actually “a proposition about propositions about real interest rates“, rather than being “a proposition about real interest rates“.

So it’s not reflexive, on analysis.

6 Commentateur April 16, 2015 at 4:06 am

#3
Barsky-Summers

7 Stephen April 15, 2015 at 10:38 am

You say ‘There is something wrong with everything’, but if there is something wrong with ‘There is something wrong with everything’ then there is nothing wrong, but there can’t be nothing wrong because ‘There is something wrong with everything.’ Illogical! Illogical! Please explain.

….with apologies to Gene Roddenberry (“I, Mudd”)

8 Maximum Liberty April 15, 2015 at 11:43 am

What is wrong with the first law is that it has no exception for itself. It is thus correct, even as applied to itself.

Max L.

9 Ivy April 15, 2015 at 11:57 am

Where is Kurt Gödel when we need him? Or did he follow the first rule of Fight (Economists) Club?

10 Aaron April 15, 2015 at 11:55 am

No, because the law is “there is something wrong with everything,” not “every statement is entirely wrong.” We don’t know what is wrong with “There is something wrong with everything;” we can’t conclude that, because there is something unspecified wrong with “There is something wrong with everything,” that there is nothing wrong with anything. All we know is there is something in some way problematic, debatable, incomplete or otherwise doubtful about the statement.

11 honkie please April 15, 2015 at 12:49 pm

The First Law lacks closing punctuation, for which I give Tyler a most enthusiastic high five.

12 dan1111 April 15, 2015 at 3:11 pm

This comment rules!

13 Sigivald April 15, 2015 at 5:49 pm

There’s a “.” after the closing parenthesis…

Did he edit it later?

14 honkie please April 15, 2015 at 8:41 pm

Indeed. You pull a guy off the precipice and the first thing he does is kick you over it.

15 JamesFromPittsburgh April 15, 2015 at 10:00 am

“…You should not have too much confidence in your own judgment.”

Cowen’s Zeroth Law!

16 anon April 15, 2015 at 7:34 pm

There was a post a couple of years ago at MR but a researcher on expert opinions-politics who stated. If you have a strong opinion on a subject in which you are not an expert it is likely you are a mind killed partisan.

17 ChrisA April 16, 2015 at 1:54 am

Hmm – counter example. Many finance professionals try to sell me complex financial products, or attempt to convince me to invest in their funds as they know how to “beat” the market. Undoubtedly they are experts in finance compared with me, however I am a believer in EMH and so don’t accept their proposals, am I a “mind killed partisan” for doing so?

Another example, the local Catholic priest is an expert in religion, but so is the local Hindu priest. Which one of these “experts” should I follow?

18 dbqp April 20, 2015 at 2:44 am

Following a religion would seem to be a strong opinion. Skepticism towards experts is surely the opposite of a strong opinion.

Your larger point that you shouldn’t defer to every expert on every subject stands, but surely there’s nothing lost by trying to understand an expert’s position before you reject it.

19 Matt April 15, 2015 at 10:01 am

Is Cowen’s Third Law not subsumed by Cowen’s First Law?

20 john April 15, 2015 at 10:08 am

Perhaps it is set theory. No proposition on real interest rates is globally true.

21 btdnyc April 15, 2015 at 10:11 am

I would prefer to see Cowen’s Third Law rebranded as Cowen’s Paradox.

22 ibaien April 15, 2015 at 10:29 am

‘any sufficiently straussian reading is indistinguishable from farce’

23 Jeff R. April 15, 2015 at 11:05 am

+1

24 Floccina April 15, 2015 at 10:30 am

2. Cowen’s Second Law: There is a literature on everything.

I have looked for certain economic subjects for which I thought some literature would exist but found none. I would doubt that law.

25 Sigivald April 15, 2015 at 5:50 pm

Does this comment consist of embodying the literature on that subject, then?

(Whoa.)

26 Sigivald April 15, 2015 at 5:50 pm

(Also, isn’t that really just Rule 34 for economics?)

27 Dave April 15, 2015 at 10:35 am

“you should not have too much confidence in macroeconomics as a discipline”

Fixed that for you.

28 Hadur April 15, 2015 at 10:43 am

“There is something wrong with everything” does not imply that everything is 100% totally wrong and thus does not by itself lead to Cowen’s third law, nor does Cowen’s first law having some kind of flaw (unspecified) necessarily mean that Cowen’s third law must be false.

29 anon April 15, 2015 at 10:43 am

4. Cowen’s Fourth Law: All food is ethnic food.

30 G April 15, 2015 at 11:13 am

+1

31 Urso April 15, 2015 at 11:25 am

self-recommending

32 JWatts April 15, 2015 at 4:37 pm

+1

33 dbqp April 20, 2015 at 2:52 am

Something like that which Hervé This calls Note by note cuisine isn’t ethnic. I would argue the same is the case for most modernist cuisine.

34 Barkley Rosser April 15, 2015 at 10:57 am

On the First Law, while there is something wrong with everything, some things have more things wrong with them than others, such as claiming that the earth is flat rather than pear shaped.

On the Second Law, well, the only things that it is easy to talk about are those for which a literature exists, and for all of those there was a time prior to that literature existing. There are certainly things for which a literature does not exists, but we are not talking about them because a) we do not know what they are, and b) if we did so on the internet, then there would be an existing literature, if only that discussion.

On the Third Law, there are clearly theoretical propositions regarding real interest rates that are completely true contingent on the assumptions of the theory being true. This means that the real truth of the Third Law is that there is no theoretical proposition for which the underlying assumptions fully hold in the real world.

35 Barkley Rosser April 15, 2015 at 11:03 am

BTW, is it not the case that the attachment of one’s name to a set of principles or laws or phenomena should be done by others? Thus, there is a “Rosser’s Equation” that is named for me, but I was not the one that affixed that label to it, anymore than my late father affixed his name to such things named for him as his Sentence, Sieve, Matrix, Theorem, and several others…

BTW, I guess I should recognize that given that you have apparently enunciated these laws in the past, perhaps someone else did initially apply the moniker to them, in which case, you are off the hook, :-).

36 Duke of Welllington April 15, 2015 at 11:27 am

Status slap from the guy that brought America the original Russian bride.

37 Barkley Rosser April 15, 2015 at 3:26 pm

Now now, we husbands of formerly Soviet women stick together, :-). And, I am sure a former student probably first came up with the labels.

38 Brian Donohue April 15, 2015 at 1:45 pm

Awesome humblebrag. Classy.

39 anon April 15, 2015 at 7:17 pm

Don’t take this the wrong way but Rosser’s Sieve is in a different league to Rosser’s Equation.

40 Barkley Rosser April 15, 2015 at 11:03 pm

Fully agree, anon, fully agree. And Day-Rosser complexity is not Rosser’s Sentence either.

41 Barkley Rosser April 16, 2015 at 12:26 am

Just to fully hammer in my agreement with anon, everything I have done is not worth either the Godel-Rosser Theorem or the Church-Rosser Theorem. I may be an arrogant egomaniac, but I do know what is what in these matters.

Oh, and of course while I disagree with Tyler’s three laws, he is completely right about the underlying point of these three laws, that we should all avoid being overly confident in our own judgment. This is also something I learned a long time ago, even if it does not look like it sometimes, especially when I am wrangling vigorously with people in the econoblogosphere, :-).

42 The Devil's Dictionary April 15, 2015 at 11:04 am

Sorry, Tyler, but there’s something wrong with your 2nd law, and your 3rd law contradicts itself.

43 Sigivald April 15, 2015 at 5:51 pm

I’m going to say it again, because it was such an easy mistake to make that I almost made it.

““All propositions about real interest rates are wrong” is actually “a proposition about propositions about real interest rates“, rather than being “a proposition about real interest rates“, so it does not contradict itself.

44 TW Andrews April 15, 2015 at 11:33 am

There is a literature on everything. I’m not sure about this. What does the literature on the existence of literature say about it?

45 J. L. Borges April 15, 2015 at 11:51 am

Everything.

46 Brian Donohue April 15, 2015 at 1:45 pm

+1

47 Tom West April 15, 2015 at 11:58 am

My corollary: Successful attainment of leadership requires never acknowledging the First Law. Successful execution of leadership depends on believing the First Law anyway.

48 collin April 15, 2015 at 12:21 pm

I have one simple political-economic law:

Law One: The quickest way to ruin your nation’s economy in the modern world is to start a war.

Collary: If you must participate in a war, make sure you are the last to enter the battle.

CR

49 Thor April 15, 2015 at 12:56 pm

Good law! But … Define “modern” here.

And to be picky, define “ruin”, and “participate” — say a nation sits on the sidelines and then enters a war near its conclusion — assuming wars conclude (!) — is that participating?

Is Russia ruining its economy by warring against Ukraine (and the West)? Is it “warring” against the West? Or is Putin manipulating sectors within Russian that he couldn’t otherwise touch without “war”? Finally, is Putin ruining anything other than Ukraine’s ability to join the EU?

50 collin April 15, 2015 at 4:36 pm

I would say Russia did ruin their economy with Ukraine last year with the run on ruble. The drop in the currency, inflation and unemployment problems would have not been as negative or harsh if Russia did not participate with Ukraine. (Or Russia would not have had to give China such favorable terms on the large Gas Deal.) A war does not automatically ruin an economy but it weaken the fundamentals and hurts the competitiveness of the economy. So in the case with the US, an Iranian bombing might not immediately throw us into a recession but it will hurt our competitiveness.

Ukraine was poor shape and now they are really bad shape.

At times, I wish the US foreign policy was like the Chinese, in which foreign policy was set by the Treasury Secretary.

51 TMC April 16, 2015 at 1:38 pm

Russia’s issue have much more to do with the drop in oil and gas prices than the Ukraine.

52 Thor April 15, 2015 at 12:48 pm

Thor’s Laws.

1: There is something wrong with everyone you date (or marry). But not all wrongs are equal. Some wrongs are wronger than others.

2: There might be a literature on everything, but the wheat and chaff must be separated.

3: Not everything can be used as a hammer.

53 dmarkey April 15, 2015 at 2:12 pm

For three to be true, you need a counterexample to “Everything can be used as a hammer.” I can’t find it.

54 Sigivald April 15, 2015 at 5:52 pm

An unenclosed gas?

(A grammatically correct but meaningless sentence?

The idea of the color tangerine?)

55 angus April 15, 2015 at 2:25 pm

Thor of all people should know that, yes, everything CAN be used as a hammer, but perhaps not everything SHOULD be used as one.

56 MD2 April 15, 2015 at 1:22 pm

“you should not have too much confidence in your own judgment.”

This is a quote from a man who has named three laws after himself.

57 Nikki April 15, 2015 at 1:42 pm

Amazing indeed, you go to all the trouble of coining laws, yet people keep violating them like they don’t even care. Ungrateful sods.

58 Brian Donohue April 15, 2015 at 1:43 pm

The literature on real interest rates is a hot mess.

59 dmarkey April 15, 2015 at 2:10 pm

Cowen’s second law is essentially rule 34 for literature.

60 srp April 15, 2015 at 3:16 pm

Barkley is wrong–the flat-earth model is almost infinitely better than the pear-shaped one for orienting in areas of less than a mile. Further breaking news–textbooks on celestial navigation assume that the earth is stationary and at the center of a rotating heavens; many subway maps assume that all the stations lie equally spaced on straight lines; and most circuit diagrams show elements and connections without reference to their actual physical positions.

61 Barkley Rosser April 15, 2015 at 4:01 pm

Sorry, srp, but at short distances the models simply do not noticeably differ, so it is not a matter of the flat earth one being either more right or better at orienting or whatever. They simply do not effectively differ.

62 Barkley Rosser April 16, 2015 at 12:18 am

And to get picky, in fact even at the local levels the pear-shaped model still beats the flat model, except that the difference becomes so small that indeed the flat model essentially performs as well and is simpler than the pear-shaped one.

Of course, as one gets really local, both get swamped by topographical features and effects, which dominate the modeling.

Anyway, srp, you are just plain wrong. Period.

63 Jan April 15, 2015 at 4:09 pm

Mood affiliation.

64 TvK April 15, 2015 at 4:39 pm

In short, one should consider the possibility that they (or oneself) might be mistaken.

65 Casey April 15, 2015 at 6:14 pm

Basically, these three laws can all be boiled down to a more fundamental essence of your way of thinking, which is that you enjoy muddying the waters, making things less clear.

Fortunately, you’re usually smart enough to do so while still providing some genuine insight.

Unfortunately, the same cannot be said of many or most of your readers, which is why your site has one of the most frustratingly dumb comment sections on the internet.

66 Davis April 15, 2015 at 6:25 pm

FYI — someone on Reddit appears to be taking credit for Law #1

One of the top posts of the day no less:
http://www.reddit.com/r/LifeProTips/comments/32oswh/lpt_if_you_cant_hold_an_argument_for_a_viewpoint/

67 ThomasH April 15, 2015 at 7:35 pm

I suggest a Corollary to No. 3

“So are propositions on everything else.”

68 duxie April 15, 2015 at 10:16 pm

Derivative duxie laws from Tyler Cowen’s laws and Robert Wilson’s http://en.wikipedia.org/wiki/Robert_Anton_Wilson quantum psychology http://en.wikipedia.org/wiki/Quantum_Psychology

1. There are limits to human intelligence not obvious to the human, thus agnosticism about everything.

2. Inflationary human thoughts will try to fill up all known or unknown universes, there is probably no big crunch (or stagnation).

3. All wrong propositions about interest rates are probably real (the duality of real that they are wrong or wrong that they are real), and vice versa, testable by Bell’s theorem.

69 Tom Warner April 16, 2015 at 12:36 am

No. 3 seems most likely to be remembered. Specific and fairly unique. No 1 not so much. No. 2 just isn’t true enough. If there were a literature about everything there would be no more new ones left to invent. I suppose what Tyler really means is that for anything you’re pondering there’s at least a literature near enough to being about it that you should take the time to look it up and read it.

I don’t know though. “There is no appropriate methodology for calculating the real interest rate that will solve your problem.” Can anybody knock that down?

The best economics laws are usually from non-economists. The Lou Reed axiom is so brilliant in so many ways. (“some people try very hard, but still they never get it right.”)

70 Chang April 16, 2015 at 12:55 am

And what do these laws suggest about Cowen’s dining guides? Mostly that they aren’t worth much.

71 easy tiger April 16, 2015 at 11:30 am

If you’re going to be mean, at least be funny or accurate.

72 Nicholas Gruen April 19, 2015 at 11:53 pm

Puts me in mind of this marvellous quote from Robert Solow.

There is a long-standing tension in economics between belief in the advantages of the market mechanism and awareness of its imperfections. . . . There is a large element of Rorschach test in the way each of us responds to this tension. Some of us see the Smithian virtues as a needle in a haystack, as an island of measure zero in a sea of imperfections. Others see all the potential sources of market failure as so many fleas on the thick hide of an ox, requiring only an occasional flick of the tail to be brushed away. A hopeless eclectic without any strength of character, like me, has a terrible time of it. If I may invoke the name of two of my most awesome predecessors as President of this [American Economic] Association, I need only listen to Milton Friedman talk for a minute and my mind floods with thoughts of increasing returns to scale, ologopolistic interdependence, consumer ignorance, environmental pollution, intergenerational inequality, and on and on. There is almost no cure for it, except to listen for a minute to John Kenneth Galbraith, in which case all I can think of are the discipline of competition, the large number of substitutes for any commodity, the stupidities of regulation, the Pareto optimality of Walrasian equilibrium, the importance of decentralizing decision making to where the knowledge is, and on and on. Sometimes I think it is only my weakness of character that keeps me from making obvious errors.

73 Ed Darrell April 19, 2015 at 11:57 pm

I think Feynman was there first. You have read Feynman, no?

74 Maj. Gen. Tanaka April 20, 2015 at 8:05 am

Tanaka’s three alls: “kill all, burn all, loot all.”

75 Bart klein Ikink (Naturalmoney.org) April 22, 2015 at 2:26 am

I guess you cannot have a good theory on interest as long as you ignore the elephant in the room, which it is that interest on money is problematic in itself. Most of the money we currently use is created by banks as a debt on which interest must be paid. This may seem a rather uninteresting circumstance, but it has far reaching implications. Economic theory tends to mystify this, so I will simplify matters and take a limited perspective. The example is a bit controversial, but it shows the mechanism of interest on money at work.

Assume that there is a small self-sufficient village that does not trade with other villages. This village only needs € 1,000 to operate its entire economy. The local bank is happy to lend the € 1,000 at a reasonable interest rate of 5%. The lender could also be a wealthy village dweller, or there could be a few wealthy village dwellers. That does not matter for the purpose of explaining the problematic nature of interest on money.

What happens? After a year the € 1,000 has to be returned, but also a petty € 50 in interest must be paid. There is a slight difficulty, a fly in the ointment so to say. The required € 1,050 simply is not there as there is only € 1,000 to begin with. Then the bank comes up with a clever solution. The economy needs € 1,000 to operate and the € 50 is non-existent money that cannot be repaid, so the bank offers to lend the villagers € 1,050 at the same reasonable interest rate of 5%.

It is now clear what will take place next. At the end of the next year the debt has grown to € 1,102,50. This may not seem much but it cannot be repaid as there is only € 1,000. After 10 years the debt has grown to € 1,628,89. After 100 years it amounts to the considerable sum of € 131,501,26. There is no way of repaying this debt as there is still only € 1,000 in the economy. Long before that time, the debt level may already have become a cause of some concern, at least by people that can make proper use of a pocket calculator.

If the villagers are quite dexterous with their pocket calculators and fear the consequences of compounding interest, then nobody in the village may be willing to borrow the extra € 50 in the first year. Then there would be only € 950 in the economy in the second year, while the debt remains € 1000. After two years there would be just € 900 in the economy as another € 50 in interest had to be paid. Because there is less money available, the economy could enter into a crisis. After twenty years, there is no money left at all, only € 1000 of debt. Long before that the economy would have collapsed.

Of course reality is more complicated. A village is unlikely to be self-sufficient. Banks make expenses, the money that banks lend may come from deposits, depositors can spend their money, and debts do not have to be repaid in one year. Still, the underlying mechanism of interest lets debts grow and makes it impossible to pay them off. This means that we continuously need more debt to keep the economy from collapsing. This is why economies seem to need more and more debt all the time. This is why governments have to go into debt when nobody else is willing to do so. And this is why economies seem to need inflation.

If you ignore something important like this, you can expect your theory to be garbage at best.

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