Credit and Blame in the Credit Crisis
Before there was any sort of scientific explanation of how the world worked, people developed and retold myths. It was a way for them to understand the workings of the world. The would see one event followed another, and like Pavlov’s dog, seeing a replay of the first event would lead them to expect the predicted follow-up event. Often, when we don’t understand how things work, we associate a false cause to events, because one time we saw one event follow another and we falsely developed a cause-and-effect association between the two.
George Bush has been in office for almost 8 years and the stock market is in the toilet and we are slipping into a recession, therefore Bush and his policies caused the stock market crash and the coming recession. Huh? By what mechanism? If you don’t understand things, you can easily make such a false association.
This is a fallacy in logic, a major mistake, that goes by the Latin name “Post Hoc, Ergo Propter Hoc.” My Mom’s Latin is much better than mine, but after four years of Catholic School Latin, her’s should be. I think she would tell you that the phrase translates into “After this, therefore because of (due to) this.” Just because two things are observed to follow in time does not mean that one caused the other.
In the late 1990s I wrote a column for the local Bayou Business News, a New York Times bi-weekly. I wrote a piece then about giving Presidents too much blame and too much credit for the state of the national economy. I think looking at that piece from time to time can be worthwhile.
While Bush’s Presidency has had its problems, such as nation building in a country that could only be held together as one country by the horrible dictator, Saddam Hussein. It was arrogance couple with a naivete about democracy that led them to believe that create a nation from people who distrust one another. Still, it is quite possible, quite likely, that the seeds of the current economic disaster were sewn in earlier years, such as the Clinton years, when housing prices began soaring and lenders began making loans to people who may not have been credit worthy.
If you learn the wrong lessons from history, you are bound to make big mistakes. Before assessing blame and credit, it makes sense to understand the cause and effect relationships, what causes what, and to understand those things well. If not, you may as well start staring at tea leaves and the entrails of slaughtered animals.
-MC