Up to the Hilt in Missing the Point

"Why is This Bubble Different From All Other Bubbles?" Megan asks. Someone wrote a story about how wealth creation should be centered around making actual wealth instead of cardboard houses hours away from any urban center and Megan goes all "That doesn't make any sense! Let me put on my thinking cap and think a hole through their argument!" Well, there's a hole in something. We do, as usual, marvel at her decision to properly capitalize the title. She does do brief flings with minimal competence.

James Surowiecki has a very interesting column arguing that this bubble was different because unlike the earlier banking booms, there was no point to the wild spending. The bubble didn't bring us railroads and electrification; it brought us . . . houses. Lots and lots and lots of houses.

I'm of two minds on this. On the one hand, I think that this is an interesting point. On the other hand, of course, the bubble in the 1920s was not limited to electric stocks, or even stocks. Lots of money was wasted on railroads, Florida real estate, mining concerns, and many other unrelated phenomena. And if you look at the history of the 1920s, you see the same thing we see in the 1998-2008 era: markets awash in too much money.

This is a stellar fucking point. I'm sure Surowiecki (Whose name can be only cut and pasted, not spelled correctly on a whim) was thinking as he wrote this article that all previous bubbles were based around only one stock. It's like those crazy people that say crack had something to do with the crime rates of the 80's. What they don't realize is that other, non-drug related crimes were also committed in the 80's so crack obviously had nothing to do with anything.

Megan seems to fully fail to comprehend the expression "irrational exuberance" and can not understand why a reasonable increase in one sector might fuel reckless optimism in all sectors. All booms show markets expanding rapidly in many areas. The question is what fucking PRECIPITATES that expansion. When it's the advent of the personal computer, well, it's a bit less retarded than when it's the belief that houses will double in price every 10 years no matter what.

So I wonder if there isn't a sort of post-hoc, ergo propter hoc reasoning to these "explanations" of the previous booms and busts. A market bubbling over wtih too much credit will end up plowing a lot of money into some technology or industry which ends up being really, really important twenty years later. (The electric revolution continued, surprisingly rapidly, in the 1930s). We look back and interpret the bubble as having been "about" that technology. But at the time, when it's not obvious what the big winner is going to be, it just looks like a giant mess.

That last little bit is almost certainly how the people who hired Megan are feeling right about now, assuming they feel things.

The Dickipedia pages for her little foray in the dead language says this:

Post hoc ergo propter hoc, Latin for "after this, therefore because (on account) of this", is a logical fallacy (of the questionable cause variety) which states, "Since that event followed this one, that event must have been caused by this one."

So either she's arguing that it was a coincidence that rapid expansions preceded booms and were concomitant with the introduction of technology that radically increased productivity or she doesn't know what the fuck post hoc blah de blah means or when to properly invoke it. That is, she is not arguing that what goes up must come down, but rather coming down is a naturally occuring phenomenon which happens without warning, regardless of height. Things flat on the ground have been known to come down spontaneously all the fucking time. While there is apparent correlation between being up and then coming back down, this does not imply causation. It is certainly possible to come down without having first attained some height above the ground. Ipso facto QED E pluribus unum, BITCH!