Thursday, August 02, 2007

Authoritative Sources, or Whom Do You Trust?

I don't know much about economics, but one of the things I think I know is that much economic theory is based on the concept of the "rational actor." Economic choice depends on having good information. But how do you know the information you have is good? This is one of the issues that librarians are concerned about as well; hence the debates over the reliability of online resources vis-a-vis print and the work of the AALL State-by-State Report on Authentication of Online Legal Resources.

There is currently a little flurry of discussion on the heuristics of trust on some of the economics blogs, starting with Arnold Kling's essay, Should You Trust the Government? The scope of Kling's essay is somewhat larger than the title suggests; he tries to come up with some rules as to how the relatively uninformed public can determine whether or not to trust "expert" opinion.

A high-trust society is one where trust extends beyond one's clan or village. Trust within families is something that can be taken for granted, even in a low-trust society. A high-trust society is one that has found a way for trust to extend to strangers.

Sometimes, trust is based on experience that leads one to believe that someone else is virtuous....

However, the highest form of trust is trust in the processes followed by other parties, including the incentives governing those processes. Information that is developed using scientific methods, with careful consideration of alternative hypotheses and limitations of the data, comes from a reliable process. Transactions are most trustworthy when they take place in a context where similar transactions have proven trustworthy and cheating is easily detected and punished.

Not all disciplines follow the scientific method. With regard to trusting economists, Kling offers a couple of suggestions:
With one exception, I think there is nothing that the public can look for in terms of a signal about economists. The best thing is to force economists to explain their arguments clearly in layman's terms, and then to evaluate the arguments on their merits. That means you have to know enough about economics to be able to distinguish a compelling economic argument from demagoguery.

The exception is this: when an economist known for one ideological leaning makes an argument that favors a different persuasion, that in itself should lend credibility to the case.
Bryan Caplan offers a few more rules of thumb:
  • Compare credentials. If the advocate of X teaches at Harvard, and the opponent of X teaches at a community college, this raises the probability that X is true. (And yes, this means that all else equal, you should side with Dani Rodrik against me. Fortunately, all else is not equal).
  • Adjust for social sanction. If X is a popular, crowd-pleasing conclusion, you should expect this to make smart defenders of X more abundant - regardless of the truth of X. You should therefore hold the defenders of such views to higher standards.
  • Check the bets. If only one side is willing to bet hard cash, that side is probably right.
  • You don't have to take a side. If you really have no idea who to believe, remain agnostic. In fact, it would be much better for the world if the less-informed practiced Swiss neutrality, leaving the well-informed to guide policy.
Kling also points to EconTalk, a podcast series on economics, and particularly to the latest episode, a conversation with economist David Henderson on why economists disagree.


Betsy McKenzie said...

Dear Jim,
Thanks for a very provocative post! I find the statement that those who don't understand economic arguments should practice swiss neutrality interesting. It sounds like the argument for a philosopher king -- leave those of us who know these things alone to govern wisely.

My problem is that I don't think economics understands a darned thing about why things happen in the real world -- the whole basis of rational decision-makers is flawed. Not only do decision-makers have to find good and reliable information, they also have to be rational. I don't know anybody who really makes decisions in a rational way. People aren't rational.

I'm more than economics agnostic -- I am an economics atheist.

Betsy McKenzie said...

PS -- Speaking of authoritative sources and legal research... I just got off the phone with an alumnus who insisted he needed the CALI password to do legal research. I tried to explain that CALI does not contain any secondary or primary authority, and would not be useful for research.

Please tell me if you have ever heard of using CALI for legal research?

Jim Milles said...

Betsy, my comment about rational decision-making was something of a red herring. There is a lot of current economics literature that disputes that simplistic idea: look for some of the literature on behavioral or experimental economics, or just subscribe to Tyler Cowen's blog, Marginal Revolution.