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Rules of Thumb

2009 December 14
by Ian Welsh

Just for amusement I’m going to throw out some of my rules of thumb: these are the rules of judgement and research that I use to cut through the BS.

Don’t trust liars Now someone isn’t a liar because they once got something wrong, or made an honest mistake. But people who regularly bend facts to make their point shouldn’t be trusted. Seems obvious, eh? Well then, why were so many people giving the Bush administration the benefit of the doubt in the run up to the Iraq war? Not only were they known liars who had lied repeatedly on taxation and economic issues during the 2000 campaign, they were caught out on lie after lie during the actual selling of the Iraq war. If they had a case, they would have made it honestly – they didn’t and it was obvious. People who bought it bought it because they wanted to believe.

Accept the Obvious The number of people who can’t accept the obvious always astounds me. Obviously people are not rational – why have we built an entire branch of economics around this BS? Obviously the Nasdaq was overvalued in 1999. Obviously Dow 36,000 was a pack of bullshit. Obviously options are an expense and if anyone tries to tell you they aren’t, tell them that since they cost nothing you’d love to have a few million of them. Obviously people who are willing to die for their beliefs cannot be usefully classified as cowards.

Read the shortest book on a subject Want to learn about a subject? Find the shortest book on the subject. Do not find the longest. The shortest will have to distill the topic down to a framework which you can appropriate and use to hang new facts and theories off of. You may well discard that theory in time but in order to remember things you have to be able to connect them to something – the framework will let you do that. Also, shorter generally forces the writer to think more sharply. That’s good. After you’ve read a few short books on myth you can read The Golden Bough. Not before.

Being Smart Means Never Having to Admit You’re Wrong Don’t fall into this trap. If you’re smart, you can work any set of inconvenient facts to support your beliefs. You can be /clever/. Don’t be clever. Don’t trust people who are. If someone has to bend logic into a pretzel to support a thesis they’re almost certainly wrong.

Human Nature Doesn’t Change Never has. Never will. Don’t believe any argument which supposes implicitly that it has.

Real discontinuities are rare Everything doesn’t change all that often. In fact, entire lifetimes go by in which almost nothing changes in entire areas of human experience. Computers did not repeal basic laws of economic gravity, they just reduced certain transaction costs and made certain types of automation easier or possible. The 90’s telecommunications “revolution” didn’t “revolutionize” it the way the telegraph did – it just continued an ongoing trend. Whenever someone tells you “things are different now” ask, “how exactly?” You’ll usually find everything is different in degree – not kind.

TANSTAAFL Nothing’s free. If someone tells you something is, they’re scamming you. If you don’t know who’s paying – it’s probably you.

There is no crisis Well sometimes there is. But usually there isn’t. And every bill that is a “reform”, isn’t. When people use words of like “reform” and “crisis” be very wary – 90% of the time they’re trying to get something changed because they have a “solution” which benefits someone . There is no Social Security “Crisis”, to use the most contemporary example. There is budget “crisis”, but it isn’t getting a lot of play.

Follow the Incentives Always ask what behaviour is rewarded or punished in any system, proposed system or legislation. Because that’s the behaviour you’re going to get.

You can’t make a man understand something if his job depends on him not understanding it.
Enough said.

Easy is not a synonym for simple. Hard is not a synonym for complicated Despite what people would have you believe, there are very few complicated problems in public life. There are, however, many hard problems in public life. Think of it this way – it’s simple to lose weight, just eat less and exercise more. It is, however, hard to lose weight. It is not complicated to balance the budget – just spend about the same as you bring in. It can be hard however, since you have either cut spending or raise taxes and doing either hurts someone.

Efficient and effective are not synonyms and efficient is not always good. That’s right – reduced transaction costs aren’t always a good thing. In fact, almost nothing is good in all circumstances. Anyone who tells you freer trade is “always” better is an ideologue. Same thing with someone who tells you that there can never be any restrictions on speech. Same thing with people who tell you there should never be any restrictions on what you can spend your money on. Well, they’re either an ideologue or they’re trying to sell you something.

You can’t look it up Knowledge you have not internalized cannot be used to think with. You cannot form connections between it and other things you know. You also can’t look something up you don’t know exists. There is no substitute for actually knowing something yourself – the internet only makes it easier to look things up, not to know you need to look it up.

If you can’t explain it, you don’t know it. ‘Nuff said.

If you don’t know it from the basic building blocks, you’re a monkey. A related rule is “do it right, then do it fast”, because if you do it fast first you’ll never do it right. If you only know the later parts of a discipline, but not the reasoning behind them, you won’t know when the rule doesn’t apply. An example is in my Ricardo’s Caveat – where generations after Ricardo forgot that comparative advantage didn’t apply to nations with free capital flows – they skip past the necessary conditions to the conclusions and take it as a universal law rather than a conditional one.

Imagination is the mother of empathy If you can’t put yourself in another person’s shoes and see the world as they see it then you’ll always be a cripple when it comes to prediction, understanding or effective action. Empathy isn’t just for symps – it’s the foundation of strategy and tactics. If you can’t think like your enemy you’re at a severe disadvantage and if you judge before understanding you’re a moral cripple.

Know Yourself Not just because you need to know your own prejudces in order to adjust for them, but because knowing your own beliefs allows you to refine your thinking. Thinking comes from emotion primarily, not from logic, and that’s fine – as long as you know what principles are driving your emotions.

Ideas are tools. Want to examine the relation of classes to the means of production? Marxism works great. NeoClassical economics doesn’t. Want to understand how positive and negative associations build up in a person?  Behaviouralism. Want to understand how people organize models of the world? Don’t use behaviouralism. Want to know how interest groups form? Conflict sociology. And so on – what works for one thing, may not work for another and the “intellectual” who is just a Marxist or just Freudian or just a Feminist – is just a fool.

Concluding Thoughts on IQ and Smarts I don’t want to get into the IQ debate, but let’s admit that some people have more processing power than other people. There are tons of people who are smarter than I am but most of them don’t know how to think – they use their brains to support their predetermined beliefs and they waste huge amounts of cycles on trivia or on cleverness that leads nowhere useful. The metaphor I like to use is this. Say you’ve got a really powerful motorbike (good brains) with a mediocre driver (bad thinker). Opposing them you’ve got a bike with a weak engine with great driver (good thinker). Now if there in a race – what’s going to happen? Well, if the race is on a straightaway the good bike is going to win. If the question is a technical one which can be stated in value neutral language and solved though pure application of logical rules – the smarter person will get there first and do a better job. But if the road is a twisty hilly one the better rider will win hands down (ask any good motorcycle rider) and indeed if the bad rider tries to keep up he’ll probably crash. And when it comes to tricky real world problems that’s what happens. The smart but rigid thinker goes where his ideology tells him to – right through hills if necessary. The smart guy who doesn’t understand the fundamentals doesn’t realize that the rules of his discipline change in certain circumstances. The guy who is paid to come up with certain results or gets fired – comes up with those results and convinces himself they’re right.

Thinking well, beyond a certain point, isn’t about how bright you are – its about judgement. It is a talent which can be refined as a skill. And it mostly isn’t taught in University or college or high school – it’s learned the hard way. An expert is just someone who knows a lot – not necessarily someone who thinks well and a professional is just someone who is paid to do something and may well be paid to do it and come up with expected results. Anyone can learn to think better if they work at it – and if they remember than while there are heuristics and rules of thumb, there are, in the end, no shortcuts.

(Reposted from BOP, 2005.  Only thing I’d note is to emphasize that sometimes it is a crisis, and you have to know when…)

7 Responses
  1. Formerly T-Bear permalink
    December 14, 2009

    I’m surprised this was not included:

    Cleaners ‘worth more to society’ than bankers – study

    Other than their coverage of Israeli atrocities, which disgraces the BBC, otherwise they come up with the brass ring for exploring and reporting.

  2. Ian Welsh permalink
    December 14, 2009

    Of course they are. That’s just common sense, and I’ve said it in the past. Nice to have a study to cite though, nice catch.

  3. December 14, 2009

    The only criticism that I would have is to add a big “Caution: See rule #1” to your read shorter books rule of thumb. There are short books that do provide a concise distillation of a subject. And then there are short books that slide right past necessary assumptions or lie out-right because they do not have to show their work. For instance, the “Politically Incorrect” series are both politically biased and very incorrect.

  4. B Schram permalink
    December 14, 2009

    “Knowledge you have not internalized cannot be used to think with”, I gained this in other fields, but certainly not economics – I can however recognize that you have, thanks for yet another good post.

    “There are tons of people who are smarter . . . .” this is perhaps the most important section IMHO. Critical thinking is the hardest work there is, and I see few people who are willing to do it. I too, learned how to think the hard way. My biggest battle is to guard against laziness, society is so willing to serve up a “value meal” of simple bland not entirely fulfilling ideas. Despite being a long time academic, I am so disappointed in our school systems inability to teach this. Consequently, I feel it is my greatest obligation to at least attempt to teach my children critical thinking skills.

  5. Jim permalink
    December 14, 2009


    This is a rule that I particularly like:

    “It is not the consciousness of men that determines their being, but, on the contrary, their social being that determines their consciousness.”

  6. Formerly T-Bear permalink
    December 14, 2009

    I’ll be more enthusiastic about encouraging thinking outside the box when there’s evidence of any thinking going on inside it.
    Terry Pratchett

    Probably a keeper in your file of Rules of the Thumb

  7. December 14, 2009

    We need to fire Bill Maher and have you host a show called Old Rules.

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