Tuesday, May 7, 2013
In about 460 BCE Zeno of Elia came up with a bunch of mind teasers he called paradoxes, which illustrated that all movement was essentially impossible. The most famous of these states that in moving from point A to Point B we must always travel half the distance - yet however far we travel, half the distance still remains. Thus you can never reach a destination.
We laugh at the idiocy of this. Yet when analyzing the economy we are more than happy to use this same logic, and decide that since point B has not yet arrived, it will never necessarily arrive.
Therefor we feel it is not necessarily true - for sophisticated economies - that massive debt must be repaid or defaulted upon, it is not necessarily true that bad paper ever has to be written down, it is not necessarily true that flawed institutions that routinely mis-alocate capital should ever have to suffer write-downs, it is not necessarily true that massive inequalities of income and wealth should ever lead to grossly inefficient economies.
A generation after Zeno, Plato of Athens came up with his theory of incisive thought which he called Syllogism. Sylligistic thought demands that in properly analyzing any situation you must ask not only what is - but what Seems to Be. As well what isn't and what Seems not to be.
Of course, it very in vogue right now to mock Plato as an inflexible fascist thinker.
The idea that things could Seem to be working yet not working at all is routinely lambasted by Nobel Laureates like Paul Krugman, daily in the New York Times.
If creating trillions of dollars from thin air and pumping it into the risk markets is bad - why then are the risk markets at all time highs?
This argument - to Plato - would have seemed so stupid - it would not warrant a direct answer. In stead he would have patiently explained - though extensive analogy - the difference between what IS and what SEEMS TO BE.
It's really too bad this distinction has become lost over the ages.
However, if you imagine the proverbial fool jumping off the top of the Empire State Building, crying out as he passes the 100th floor "This is awesome, I'm flying!" You might imagine he would feel different when he hits the pavement.