When common sense fails

I was at a social function last weekend and the conversation turned to economics – surprise surprise. I was the only professional economist in the group. I try very hard to avoid discussing economics in these circumstances because experience tells me that misunderstandings quickly occur as the “intuitive” or “common-sense” economists seek the floor. I would much rather talk about weeds growing than the sustainability of budget deficits in times like that. But, alas, someone said “but we’ve got a 50 million-dollar deficit who is going to pay for that?” Another member of the group, who is very articulate and fairly well-read in Modern Monetary Theory (MMT) but not a professional economist stepped in to save the day. She proceeded to explain how common sense is a dangerous guide to reality and that not all opinions should be given equal privilege in public discourse. The conversation deteriorated because the “deficit worrier” and others immediately personalised this observation and considered it to be a attack on their life’s experience. Notwithstanding the tenseness of the situation, it was an interesting demonstration of the flaws in logic that govern the way people think about economics and the way politicians exploit our (flawed) reliance on common sense. Our propensity to generalise from personal experience, as if the experience constitutes general knowledge, dominates the public debate.

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