Sunday, July 12, 2009

Draft comment Open Left

That is me, I would like to throw in a little something I put up at Angry Bear the other day.

The topic was the empirical data of the effect of tax rates on economic growth. Fellow Bear cactus, who has a book on this coming out soon, has showed conclusively that even adjusting for lag effects that economic growth has been higher under Democratic presidencies with higher tax policies than under Republican presidencies with lower tax policies. Which shows that the Supply Side claim that higher taxes discourage work and investment does not have an empiric basis.

Which of course caused a commenter to rather smugly point to the Wiki article on 'Correlation does not imply causation'. Well true enough, but the relation is not symmetrical. Hume pointed out a few hundred years ago that no amount of positive observations of B following A logically proved that A causes B. It may in fact result in a psychological certainty that the Sun will really will rise in the East tomorrow which makes it perfectly rational to act as it it were a certainty. Which doesn't make it one from a strictly logical position.

Now Popper came at this from a different direction. If someone is making the positive claim that A causes B then even a single negative observation casts doubt on the relation. This he called 'Falsification' and used as the demarcation between Science and Pseudo-Science.

Supply Side economics and the broader Classical Liberal Economics from which it brings has relied on claims of logical certainty, they predicted certain specfic effects that didn't happen. Which causes them to adjust the THEORY to account for the differing outcome and leave the practice whether this be deregulation or tax cuts alone.. The Left generally is not immune from this impulse, certainly Vulgar Marxism has had no difficulty swallowing outcomes that are contradictory to predictions and so staying the course.

FDR struck a new course and so established a new kind of Liberalism that was not as theory bound as the Classical Liberalism that spawned both Chicago style liberal economics and Marxism, the New Deal did not insist that was either a magical Invisible Hand that would fix everything, or that we should institute rigid and very visible Five Year Plans whose failures would be explained away by 'Wreckers' who could then be sent to the gulags.

So I think it is fair to describe New Deal Liberalism as Enlightenment Liberalism, its practitioners have confidence in its methods which are empirical and outcome based without welding themselves to some big-C Certainty.

Now it is always psychologically more comfortable to cling to Certainty and never more so than in a time of serious economic and social flux, it is not easy being the anti-proverbial atheist in a fox hole. But Popperian style Empricism forces us to accept that we live in a probabalistic world, excorciating the Leader for not being true to the Faith or the Faithful for not being true to the Leader is ultimately counterproductive.