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Thursday, March 15, 2012

Another Riddle: (come on, give it a try)

Here's another riddle:

America has 400 Billionaires in a population of 307 million.

Venezuela has only 2 billionaires in a population of 23 billion.

What does this tell you about the respective economies and economic systems of these two countries?

Here's one possible answer:  "If Venezuela were on economic par with the US they'd have 45 billionaires, therefor it's clear the wages of socialism is economic deprivation:" This according to Dennis Gartman.

Here's another:  "US capitalism tends to concentrate wealth exclusively in the hands of the very few: therefor the wages of capitalism are economic deprivation."

Which answer is correct?


This is a classic example of fast thinking which substitutes a simple correlation between two random events and then designates a false causation.  You hear this every day over and over from every talking head on every subject.

Why?  Because it's easier than thinking things through.  And it's faster than thinking things through. And it supports the positions we want supported, which will not always be the case if we bother to think things through.

The trouble is - (well, one amongst many troubles) that the longer we engage in this fast and facile thinking the less able we are to think things through.  

The first step in thinking is learning the difference between correlation and causation.

If you don't know how to do that, try the book Freakonomics, which, despite the flashy title, is all about the "surprising" things we learn about our world when we learn to distinguish the difference between Correlation and Causation.

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