We make many decisions without "knowing", I say, develop your intuition~right decisions will flow easily.

Date:   7/18/2005 6:32:27 AM ( 19 y ago)

How Little We Know
by Michael S. Rozeff
by Michael S. Rozeff



"How little we know
How much to discover
What chemical forces flow
From lover to lover"

Can you hear Sinatra’s voice? Then tell me, what’s the rest of the lyric? Can’t remember? Join (most) of the rest of us. Those of you who know the whole lyric, tell me exactly what you’ll be doing 2 hours from now. These are hard questions. Maybe for this web site and non-Sinatra fans a political question is fairer. What man is seventh in line to become President should the first six in line die?

I know so very little. How much thought does it take to understand that truth? Almost none. I could ask myself a few questions like the above that I can’t answer. I could visit a library. I could wonder how a baby grows, or why it thunders but doesn’t rain.

How little I know about myself as well. I do not know why I write these articles. A number of possible reasons have spun through my head, but I have no idea which ones explain my choice. Socrates advised us to "know thyself." That suggests that he thought that we didn’t know ourselves but that it would make a good investment if we did.

Still less do I know about other people. How many people do you really know well? I mean, you know what they want and why, how badly they want it, how they would act in different situations, and so on. That’s practically impossible.

The fact is that we have limited knowledge when we make choices. We constantly make decisions while living in the dark world of uncertainty. Marriage, job, children, the future, health, death, satisfaction, happiness – we never know what’s going to happen to us or what will please us or make us happy or sad.

Why are we ignorant of so much? Half the story is that knowledge is costly to obtain and use. We use time and other resources to find out something. Meanwhile we could have been doing something else, and that counts as a cost too. Information about the future is very costly. Most of the time, we cannot know the future at any price.

The other half of the story is that knowledge is valuable. If I can use a piece of knowledge or think I might use it in the future, then I may want to gather it in. Actually, we often invest time in the expectation of gaining knowledge without knowing at the outset whether we will or won’t. If you, dear reader, are still with me, then you are anticipating that in the rest of this piece, you will gain more than the cost of reading it, a few minutes of your time.

I’ll spell out 5 gains from learning. I’m reading some books on policing right now. I am hoping to learn enough to be able to say something intelligent about private policing. That was first. Then, I counted on a certain amount of serendipity. Experience has taught me that. Third, there is some inherent pleasure in learning. Fourth, it’s good for the health of me and my brain. Fifth, learning creates options that I can exercise in the future. Knowledge widens my available range of opportunities, now and in the future. This could be the most important aspect of all. It has to do with profiting in the future in unanticipated ways by learning something now.

Curiosity is one of those fine and natural human characteristics that, within normal bounds, works in our favor. I’m in favor of encouraging it, not killing it. It leads to learning, serendipity and widening of opportunities.

I have written that I make many mistakes and that everyone does. We cannot help it. The main reason for it is that we make decisions under uncertainty. And the reason for that is that it is too costly to get the knowledge to dispel the uncertainty completely.

Each of us selects what we want to know and what we want to ignore. Much of the selection is done without thought. I believe that this is because thought is costly too, and it often does not pay us to think about things. Habits and other rules are cheaper methods sometimes. I believe that economic principles of choice apply to our internal brain processes.

My model for man includes a component that says that each of us learns what we think rewards us individually, net of the costs of learning. The rewards can take many forms – satisfaction, pride of accomplishment, happiness, love, friendship, money, pleasures, power, etc.

The costs of knowledge suggest to me that I can never know myself fully, and still less can I know you. Practically speaking, this model of man and knowledge suggests to me that, although I can advise you, put out my ideas, warn you, help and counsel you, what I cannot do is effectively make your decisions for you. I simply do not know enough. You are responsible for that, in my view.

In addition, if you handle your own affairs, then you will garner all the benefits and pay all the costs of your choices. That will surely keep you on your toes. If things work out badly for you or me as we go our ways, since life is by no means easy for anyone and hard for very many, then we may have to accept the help of others. And if things work out well, extending help to others is another one of those fine human characteristics that will never die.

In sum, our individual decisions relate to our own particular knowledge and our own opportunities, to our own wants, and to our own resources, among other things. When we act, our choice depends on our theories of what works, what might bring us rewards and how big they might be, what the costs might be now and in the future. Uncertainty dominates the future, but knowledge is one method of removing some of it.

Social Security

According to my model of man, it is wrong, for example, for me to force you to save money. How you handle your financial affairs is one of the most central aspects of your life, right up there with your religious views, whom you may choose as a spouse, and your line of work. How can I possibly meddle in this without taking away a very important part of your life, one that involves relationships of young and old, work and leisure, husband and wife? How can I take away your future options without making you worse off? I can’t.

There is only one even remotely plausible way, and that is if I take away $20 from you and give you back $40. But this way is wrong because of the principle of my action, which involves coercion and establishes the idea that theft is right under some circumstances. Even more wrong, if I can logically say that, is if I give you back $40 and you understand that I have taken $20 of it from a passing stranger.

Consider the passage of the Social Security Act of 1935. What model for man did this presume? What ethics? Francis Townsend played a role. It is said that he proposed a pension plan based on forced savings after seeing three old ladies rummaging in garbage cans for food. He also presented a petition to Congress with a reported 10 million signatures. One source says 20 million.

Townsend proposed a $200 a month payment to every retired person over 60. That’s something like $2,900 a month in today’s dollars. It was to be financed by a 2% tax on business transactions. No wonder he got millions of signatures. This was a very large free lunch to be paid for by someone else. This led to the Social Security Act of 1935, which passed the House by a 372-33 vote (27 not voting) and 77-6 (12 not voting) in the Senate.

This sorry episode in American history displays how self-interested behavior works to society’s detriment when it is harnessed to the political machinery rather than the free market. A great many people were quite willing to accept a healthy and unearned bounty stolen from others. Their self-interest overruled any ethical considerations. Nearly all the politicians were quite willing to accept the political benefits of passing the legislation. President Roosevelt pressured the Supreme Court with the threat of packing the Court. It then caved on the issue. The self-interests of all these leaders trumped any consideration of their oaths of office, liberty, the Constitution, or ethics.

The idea that they did not know enough to tamper with the lives of millions or the lives of millions to come and that their actions were for this reason alone wrong, as well as ethically wrong, was overruled by the attraction of personal gain. Those who actually believed that this legislation was for the good of the people or the country were simply wrong in their belief. These legislators had absolutely nothing to give to pensioners but what they stole from other taxpayers. How can such a theft be good? What lesson does it teach except that thievery is allowable and praiseworthy, that it is the noble work of statesmen?

Conclusion

If you are ever even remotely tempted to support the coercive acts of the State, just remember that the legislators do not know enough to live your life for you. They simply do not have enough knowledge and cannot possibly have it. If they hold hearings from now to Doomsday, they won’t know enough. Hearings are charades, packed with witnesses whose testimony plays a pre-arranged role in the play staged for public consumption. If someone does say something that discomforts the script, you can be sure it will be ignored or twisted into conformity. If a politician makes a speech about the public benefits of legislation, you can be assured that this is hogwash and worse, designed to assuage the gullible. Lying comes as natural to a politician as warts to a toad. Our rulers know enough only to seek their own gains by using the political system.

Now then, the Attorney General Alberto R. Gonzales is seventh in line to succeed the President.

And How Little We Know continues

"How little we understand – what touches off that tingle
That sudden explosion – when two tingles intermingle
Who cares to define
What chemistry this is
Who cares with your lips on mine
How ignorant bliss is
So long as you kiss me – (and) the world around us shatters
How little it matters – how little we know
(how little we know, how little we know,...)

July 16, 2005

Michael S. Rozeff [send him mail] is the Louis M. Jacobs Professor of Finance at University at Buffalo.

Copyright © 2005 LewRockwell.com


 

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