Tuesday, May 5, 2009

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!


Susan of Texas said...

She just seems to have shoe-horned the Latin in for no reason. Is she trying to say that people think booms are about wealth created by a certain technology when they're really about easy credit? And that we don't know yet if there will be a new technology or industry so we think everything's a mess but maybe not? And that means that Mr. Cut-And-Paste might be wrong that nothing has come out of this bust?

Oh, I finally get it, too late--I already wrote my post about this. The only explanation is that she's trying to say that this wasn't a housing bubble, it was too much money in the system. (Her stupid Greenspan-derived theory that too much Asian savings created the bubble, not low interest rates and slice and dice mortgages.)

Jesus, a wanker and too ashamed to just admit it--she has to hide it in obfuscation.

NutellaonToast said...

I don't think she's trying to say anything, or at least anything coherent.

NutellaonToast said...

Oh shit, I didn't read her last paragraph very closely. I tend to zone out because she's usually so repetitive. I thought she was doing her "we may never know" schtick. How retarded do you have to be to think that the industrial revolution, electricity, and personal computing weren't in and of themselves economy expanding. Nope, it's just MONEY MONEY MONEY. Throw enough money around and you'll get something as important and revolutionary as electricity every fucking time.

Malaclypse said...

Mr Cut-N-paste has a point, which does not imply Megan does.

The late 90s bubble at least gave us a lot of communications infrastructure (same concept with railroad bubble of the 1870s, and so on). This bubble, however, gave us houses in the middle of nowhere, many of which are literally being bulldozed to avoid maintenance costs.

Donating said houses to Habitat For Humanity seems to be something simply beyond the pale.

NutellaonToast said...

I agree cut and paste has a point. I think he's completely right.

Some Guy said...

That title's a joke, right? I mean, normally I'd assume it was, since "this time is different" is pretty commonly regarded as the cause of bubbles. But with Ms. McArdle...

Dillon said...

"That doesn't make any sense! Let me put on my thinking cap and think a hole through their argument!"

So sue me said...

What a tiresome, vapid person she is. "...we have just vaporized a lot of wealth, so something must have come of it...there will be some clever person who will do something wonderful..."
The only thing that comes of it is that we have the potential for a generation of people to be less inclined (or able) to invest in any so-called technology of the future.
I had an argument with a neo-con fellow traveler who claimed he taught Truth.
When I said "Oh, Philosophy?" he said "No, Economics."
I laughed...
"But surely Economics is just applied Psychology?" I said.
He didn't like that, but that's what it's all about...it's not magic. If some smart kid doesn't get into engineering school because his struggling middle-class parents have lost their money, that is a source of concern for the future.