Damned lies and statistics in a post-truth world

Newt Gingrich, ex-speaker of the US House of Representatives, enemy of the first president Clinton and ally of would-be president Trump could teach economists a thing or two about human behaviour.

In a recent interview with CNN he explained why Trump will be the man to tackle America’s crime wave. His interlocutor pointed out that on just about every measure, crime in the US has been falling for years. Gingrich at first disputed this. When it was made clear that these were published statistics, he cleverly changed the tone of the conversation by referring to falling crime numbers as ‘theories’.

It was then revealed to him that these were in fact numbers taken straight from the FBI’s database, hardly a repository of left-wing anti-Republican thinking. His response: “Liberals have a whole set of statistics which might be theoretically right but it’s not where human beings are.”

Gingrich pointed out that, as politicians, both he and Trump know how people feel. “And the American people feel that crime is on the up. I’ll go with that rather than your liberal statistics.”

Governing liberal elites will, of course, sneer at all of this: that’s how the UK nearly lost Scotland, how it lost the EU and how Trump might be the next president.

Pamphlet wars

Political debate in the US and the

Brexit

campaign has led some to conclude that we are living in a “post-truth era”. Such thinking is not as contemporary as is often suggested: the term itself is relatively new but the practice can be seen as far back, at least, as the “pamphlet wars” of 16th century England where opinions about religious freedoms, proto-feminism and the execution of a monarch were exchanged, often with extreme consequences for the authors. Participants in social media’s echo chambers are not as innovative as they often claim.

Those early pamphleteers and Twitter have changed the way we conduct debate. But the practice of simply repeating things that are not true is hardly new. What is different, perhaps, is the extent to which it happens and the ensuing consequences. If social media is responsible for both Brexit and Donald Trump there are surely legitimate questions about its societal value.

Economists know that people’s beliefs matter: it is not too difficult to build a simple model where the state of today’s economy depends on what people expect for tomorrow. The trouble lies with those expectations: we know very little about them. But their importance has long been recognised. Keynes, for instance, talked a lot about “animal spirits” and their central role in driving investment and consumption.

Why did people believe the lies of the Leave campaign in the UK? Why did they continue to believe them when they were shown to be lies? Why do people believe Donald Trump and his friends make any sense? While we know little about how people acquire their beliefs and feelings, we do know a lot about what happens once they do.

The Great Financial Crisis, for example, was caused by two beliefs: first, that house prices can never fall and, second, that banks are well regulated.

Popular support for – and belief in – demagogues is not new. Neither are the consequences. The current state of the Venezuelan economy – the world’s lowest growth rate, highest inflation rate – is a tragedy for its people, many of whom are hungry, not just unemployed. Brexiteer-in-chief Michael Gove argues that we don’t trust experts any more. Good luck with the alternatives.

Why Brexit won

Post-Brexit analysis of just why 52 per cent of the UK’s population thought leaving the EU a good idea has begun and is already revealing some fascinating insights. The picture is much more nuanced than the superficial and condescending conclusion, reached by many, including this commentator, that it was the old, the North, the unemployed and the uneducated who voted out. Another example of how tricky it is trying to make accurate inferences about other people’s beliefs and feelings.

The UK is providing a startling real-life demonstration of Kubler-Ross’s five stages of grief: the move from denial to anger has been almost instantaneous and is where most Remainers are stuck. Leavers are also angry but for a different reason: they are incandescent with rage at the Bank of England for “talking the economy into recession”. I wonder if they also believe the bank could talk us into an economic boom? Another example of weird beliefs.

The bargaining stage of the process will be the most interesting: countless studies have been produced in recent weeks, all saying the same thing: Leaving is going to be immensely difficult and expensive. When the new prime minister says “Brexit means Brexit”, she is displaying a Gingrich-like command of the language. Nobody had the faintest idea, not a clue, what Brexit actually means. It is that complicated.

As this slowly dawns, I suspect many of us will get stuck in the depression stage of the grieving process. That deeply unpleasant psychological state will have obvious economic consequences. Acceptance remains a long way off. This all feels pretty grim to me.

Cliff Taylor is on leave