Why I Value Logic Over Data

Some people think the most rigorous way of thinking about the world is “empiricism”, their word for looking at the “facts” (accumulated statistical data) and making up their minds on that basis.

There are at least two glaring issues with that approach:

  1. The decision about which facts to research and include have a strong influence on your conclusion; this is a problem with forming theory from history, which Mises discussed at length in his works
  2. The facts may not be disinterested; they may be purposeful fabrications or distortions of the public record, produced by propagandists and other agenda-driven entities, or they may be erroneous outcome of an act of unintentional negligence

Number one is always a risk because the hardest person not to fool is yourself, and most people won’t even realize they’re selectively picking data points until they’ve already been happily surprised to realize the facts agree with them and their mind is made up.

Number two is far more sinister because it corrupts the entire empirical enterprise. You can’t reason about the facts when they have no connection to reality.

Few people, if any, take the time to sniff through their sources. They see some number, they assume it was compiled accurately or honestly (or both!) and get on with reasoning from the data. The questions of methodology, competency and partisanship are not part of the equation, and if they were considered, one might be taken aback at just how long it takes to conduct a verified empirical study.

Using logic is more efficient. I don’t have to worry about whether someone is trying to mislead me with bad data. I can think about the logical structure of the argument in question and make up my own mind about its soundness.

The Fed Grasps At Straws

Here is a really stupid headline and story summary from the WSJ, which I believe is worth saving for posterity as it is indicative of the times in so many ways:

Federal Officials Say No Thanks to Negative Rates
Fed officials don’t think negative rates are needed in the U.S. because the economy and job market are improving and they are hoping they will never have to use them in the future given their uncertainty about whether the policy works.

They claim they don’t “need” negative rates because things are improving, but they won’t raise rates, which is what typically happens when they’re done subsidizing with monetary policy.

But despite their present judgment, they’re simply “hoping” they wont have to use them in the future, which suggests they’re not confident about their present judgment.

Meanwhile, the reason they’re hoping they won’t have to use them is because they don’t know if they work. So, they’d be willing to try something that has some chance of making things worse, in order to see if it has a chance of making things better.

So this is the era we live in: the central bank refuses to return things to “normal” while insisting things are on the mend, is open to conducting monetary science experiments on the economy despite initial misgivings, and reporters write stories about this chicanery as if these are all serious and respectable ideas to entertain. Couldn’t a bunch of Fed chimpanzees at the trading consoles have a reasonably good chance at improving upon this model?