Thursday, 3 June 2010

Trampled by the march of events

The enemy of the conventional wisdom is not ideas but the march of events.

That's the economist JK Galbraith - and he should have known having written favourably about the Soviet economy before events proved him misguided.

Show is so much more effective than tell. We see this in war, where conventional wisdom is usually disproved - disastrously - in the opening phases. The maverick and ignored generals of the inter-war period turn out to have been on to something. We also see it in economic crashes (which is what Galbraith was probably referring to). The new paradigm is shattered not because someone very clever points out its absurdities but because they lead it to implode as the world moves on.

Are there any useful conclusions to be drawn from this? I suppose you could say that if you want to win an argument, it may be best not to talk but to do. Speed the world up. However, with the really big stuff - like the Euro, the pre-crash banking system - you may just have to be patient (unless you're a hedge fund manager).


H/t Hugh Hendry.

2 comments:

Brit said...

I think the most useful conclusion - as in NN Taleb's Black Swan - is to acknowledge the limits of our ability to predict or understand.

Hey Skipper said...

The maverick and ignored generals of the inter-war period turn out to have been on to something.

The problem is knowing which ones.