April 8, 2012

The debunking of conventional wisdom

Colin Read: Everybody's Business

---- — I had an interesting discussion with a friend who never ceases to provoke me to think more deeply about simplistic wisdom.

Up to about 50 years ago, conventional wisdom was not a pejorative. The consensus opinion of experts and the public was often regarded as correct and, hence, wise.

This was in an era of humankind in which there was little that could differentiate the correct from the incorrect. We may each have our own subjective views, but there were few objective tests all would accept as the final arbiter of the truth.

Around the time John Kenneth Galbraith published "The Affluent Society" and redefined the meaning of conventional wisdom, tools of economics and the social sciences were increasingly brought to bear on commonly held beliefs about our social institutions and agencies.

As we began to look more closely at some of these "truisms," we discovered they were not always true. Hence, conventional wisdom was redefined to mean a false wisdom based less on good science but more on opinion and what we want to believe.

There are hypotheses that can be tested in a scientific manner. The study of economics takes assumptions and hypotheses and develops conclusions that can inform our decisions.

Unfortunately, thoughtful wisdom often flies in the face of conventional wisdom. Galbraith attempted to make us aware of our human tendency to accept as true what most people believed, often because it was most comfortable for the greater number of people. It allows us to maintain our fragile status quo.

Imagine if we held to such convenient truths to which we have subscribed in the past. The world would still be flat, a woman's place would still be in the home, those who are different from us would be so because they are less enlightened, and a glorious past would unfailingly dictate an equally glorious future. We can lay on our laurels, parlay our privilege, and take security in our social class.

Of course, there are good forms of conventional wisdom. We subscribe to the American Dream by which each of us will be judged solely based on our merits, aspirations and hard work. Yet, we also see our economy and society regress at times in a repeal of merit, replaced by a sense of entitlement.

Entitlement comes at a horrible price. It removes the reward of merit and offers comfort without the need to stretch and to better one's self and our children's future. In that sense, entitlement becomes a vicious cycle.

We seem to fall into this trap especially in times in which we feel our world and world views are threatened. We retreat into a group-think that focuses not on what we can do or the debates we should have, but to collectively duel with windmills placed before us by those who want us distracted because they find us more malleable when under siege.

We suspend reality and seek out the simplistic solutions that conventional wisdom often commends. We conclude broadly that government is our salvation, or government is evil. We decide that more taxes for some is good, or lower taxes for some or for all is good. We conclude that larger budget deficits are good or looming deficits are bad. We become Democrats or Republicans, advocates for more school spending or less, pro-life or pro-choice, proponents of open borders or closed borders or believers in the merging or separation of church and state.

While these positions may be appropriate at some moment in time, no simplistic solution will be correct all the time. If we begin to define ourselves around the advocacy of such "platforms," dialogue stops and diatribe begins.

I long for an age of skepticism in which we agree not to adopt any one tidbit of conventional wisdom just because a majority, or vocal minority, believes it. In an era in which we are presumably better educated than at any time before and are bombarded with more information than ever — even if the information may be of dubious quality at times — now should be the time we can have the great debates.

Let's not take safe harbor in comfortable ideas based on something that might have worked in a world that has long since changed. Let's have great debates about challenging issues. And, let us insist our politicians pander not to our minorities or to lobbyists but to our greater society.

Let us think independently. Then, conventional wisdom will be revealed for what it is, and we can move on to what could be.

Colin Read is the chair of the Department of Economics and Finance at SUNY Plattsburgh. His tenth book, Great Minds in Finance — the Efficient Market Hypothesists, is coming out this fall. Continue the discussion at