RIP: Common Sense

[Brian_Matthewson]

An Obituary printed in the London Times.....

 
Today we mourn the passing of a beloved old friend, Common Sense , who has been with us for many years.
No one knows for sure how old he was, since his birth records were long ago lost in bureaucratic red tape.
He will be remembered as having cultivated such valuable lessons as:
- Knowing when to come in out of the rain;
- Why the early bird gets the worm;
- Life isn't always fair;
- and maybe it was my fault.

Common Sense lived by simple, sound financial policies (don't spend more than you can earn) and reliable strategies (adults, not children, are in charge).
 
His health began to deteriorate rapidly when well-intentioned but overbearing regulations were set in place.
Reports of a 6-year-old boy charged with sexual harassment for kissing a classmate; teens suspended from school for using mouthwash after lunch; and a teacher fired for reprimanding an unruly student, only worsened his condition.
 
Common Sense lost ground when parents attacked teachers for doing the job that they themselves had failed to do in disciplining their unruly children.
 
It declined even further when schools were required to get parental consent to administer sun lotion or an aspirin to a student; but could not inform parents when a student became pregnant and wanted to have an abortion.
 
Common Sense lost the will to live as the churches became businesses; and criminals received better treatment than their victims.
 
Common Sense took a beating when you couldn't defend yourself from a burglar in your own home and the burglar could sue you for assault.
 
Common Sense finally gave up the will to live, after a woman failed to realize that a steaming cup of coffee was hot. She spilled a little in her lap, and was promptly awarded a huge settlement.
 
Common Sense was preceded in death, by his parents, Truth and Trust, by his wife, Discretion, by his daughter, Responsibility, and by his son, Reason.

He is survived by his 4 stepbrothers;
I Know My Rights
I Want It Now
Someone Else Is To Blame
I'm A Victim

Not many attended his funeral because so few realized he was gone.
If you still remember him, pass this on.
If not, join the majority and do nothing.   

[QBS]

How sad.  We should all mourn his passing.  I do.

[supervision]

    Common sense, should be taught as an important part of critical thinking.

[Brian Moffet]

Most often "common sense" is neither common nor sensical.

[supervision]

   ok Brian, school me, are you saying you have to be born with it, or it has to be instilled at an early age by caring Parents?   

[Brian Moffet]

You can't be born with common-sense.  You can be taught common-sense, but it's a life-long lesson. And it always has to be re-examined to determine if it is in fact sensical.

If you actually take a look at a lot of what qualifies as common-sense, it ends up being incorrect.  There are certain simple common-sense things that do make sense, don't put your hand in the fire, etc. However, once you start getting to some of the edges, what people think or do because of common sense isn't really good or sensical.  And by doing the "common-sense" thing, it actually worsens the situation.

Take a look at the condition in Europe right now.  Common sense says that the governments of Spain (which was running a surplus prior to the crisis) has to cut costs and increase taxes, your typical austerity measures, in order to reduce the debt to GDP ratio.  However, what ends up happening is that the GDP has dropped substantially.  The debt has dropped to, but not nearly as quickly as the GDP. So you end up in a situation where the debt to GDP ratio increases instead of falls. And because of the concern of the people who purchase countries bonds, the selling price of those bonds go go lower, which means the country can't tackle the debt anymore (no one will loan them money). The common-sense approach was wrong and did not work, and led to greater financial harm and pain than the option of increasing GDP instead of lowering debt.

Or take a look at counter-steering.  Most people who ride motorcycles do it by accident.  Common-sense says that if you want to turn left, you turn the handle bars to the left. Do that at anything other than very low speed, and you end up going right. The reason is that by turning left, you are imparting a torque around the horizontal axis of the motorcycle from below the horizontal axis.  The wheel goes left, which causes a clockwise torque (viewed from the back) which leans the bike to the right.  The common-sense approach potentially leads to a high-side when someone tries to avoid the ball that's suddenly in the street.

Or take a look at personal finances.  If you have a house mortgage and have paid off 20 of 30 years, at this point in time you are paying mostly principal instead of interest.  So common sense says that you don't need to worry about refinancing at a lower rate (because you're not paying much in interest).  But, if you look at it, refinancing the amount you owe for a 10 year period can lead to paying even less interest over that 10 years.  The common-sense leads you to paying more money for the last 10 years rather than taking an action and paying less.

These are three examples of common-sense approaches leading to worse situations, all being justified by common-sense.  There are some areas common sense can be taught, but it should always be backed up and thoroughly examined by some logic.

[Brian Moffet]

"Fathom the odd hypocrisy that the  federal government wants every citizen to prove they are insured, but people don't have to prove they are citizens."  - Ben Stein

Comparing apples and oranges to make a joke.  If you examine (see my previous post) what is being said, you see that the comparison doesn't make any sense.

The federal government requires every citizen needs insurance so that health insurance costs remain lower.

People don't have to prove they are citizens to the government for a lot of different reasons.  If they get subsidies for health care from the government, they will have to prove they are citizens. In the case where they don't get subsidies, if it is important that they are citizens to apply for a particular policy, the health insurance companies will require them to prove they are citizens.

See how the ramifications of one compared to the other makes the statement fall apart?  Mr. Stein compares health care policy to some policy I am not even aware of.  You have to prove you're a citizen to vote, you have to prove you're a citizen to get hired, you have to prove your a citizen to get a passport.  I guess he's comparing it to the actual act of voting instead of registering to vote...

[Brian Moffet]

Re-vision, I'm going to guess that your comment has to do with my comment on Spain.  Since Spain is not bank, and the only other example is with a home loan..

Spain had a surplus. They didn't spend all of their money. They had almost no budget deficit. They don't have a really strong welfare state.  The problem is that they locked themselves into an inflexible valuation of the Euro, which is very much like the "gold-standard" countries used to follow.

http://krugman.blogs.nytimes.com/2012/02/25/european-crisis-realities/

Following my first post, one needs to continue examining common-sense (as your common-sense says my government finance problem doesn't hold water) and seeing whether it makes sense given the particular circumstances.  If you take a look at a lot of very good economists, you can figure that out:

http://delong.typepad.com/sdj/2011/05/martin-wolf-on-the-eurozone.html
http://krugman.blogs.nytimes.com/2012/03/07/finally-spain/

If you wish, you may continue looking for more information. It's not my duty to get you more or less informed.

[Brian Moffet]

My comment has to do with banks worldwide but mainly with US banks which are worse off than most other banks. Brian, if you think I'm ill informed and you are not, I would beg to differ with you.    BDC

I never mentioned U.S. banks, I did mention Spain as a country and a household making a decision for a new mortgage.

As to whether you are ill-informed in my opinion or not, why should that make a difference?  I know lots of people who think I am ill-informed, it doesn't change me at all. As I mentioned, it's not my duty to change your information level, ill, properly, or indifferent.

[supervision]

   Brian, I can only say thanks for the links, I have been reading the whole time, don't understand to well, but very informative.  I'll be back.

[fret not]

I think the credit default swaps are a form of organized crime (fraud).  The banks should never have been bailed out.  I'm sure it would have been difficult for most folks but the main economic crisis may well have been over and done with by now if the perpetraitors had been allowed to sink on their own.  We are all paying for it in inflated money, and just you wait, there's more to come.

[Brian Moffet]

The banks should never have been bailed out.  I'm sure it would have been difficult for most folks but the main economic crisis may well have been over and done with by now if the perpetraitors had been allowed to sink on their own.  We are all paying for it in inflated money, and just you wait, there's more to come.

If you follow some of the links I provided, you can find arguments that your common-sense idea above is incorrect.

Or you can read this short piece: http://www.project-syndicate.org/commentary/slouching-toward-sanity

[Brian Moffet]

A little experiment for you, go back 4 years and establish 2 trading accounts:

1) follow the rules of the economists who say that inflation is just around the corner and the U.S. is going to turn in to Greece.
2) follow the rules of economists like DeLong and Krugman, where inflation remains low and lending is very cheap.

See which nets you more money.  Hint, this has actually be done, and the results came in favor of number 2 above.

I've provided links to information indicating the economy, as far as I can tell the only counter-story I have seen is "that can't be true".  So I am going to stop responding to this thread.

Have fun.

[supervision]

       Brian, thanks for giving me insight from different perspective.     I am allways trying to learn, and it is my own fault that I dont understand the vocabularry, of learned people, slows me way down on understanding as I read.   

[fret not]

I think common sense and high finance are mutually exclusionary.  The biggest problem I see is the lack of empathy for the folks that get squeezed and screwed, and the fact that when you get so much money together all of a sudden right and wrong no longer exist, everything becomes shades of gray as ethics go out the window.  The financial industry is built on this.

It reminds me of a Benny Hill skit where a politician (Benny) is accused of some wrong doing and his reply is "Oh, I would never do a thing like that, unless it was absolutely convenient".

[The Prophet of Doom]

Reminds me of a cop I knew who said he would never plant evidence on someone unless he knew in his heart the person was guilty

[JohnAMcG]

I like how a post on common sense lead to experiments in economics, I took some econ in college, and was blessed by God with sense.  It can't be that hard, it's all butter and guns, right?

In this experiment, I suppose we are to pretend that inflation means something other than an increase in the money supply.  I didn't know the scientific method applied to etymology as such, but for the sake of political expediency we are to assume that this graph is flat http://en.wikipedia.org/wiki/File:Components_of_US_Money_supply.svg. 

Now it gets tricky, since I don't know what paper Delong or Krugman would have me push around, that might net me more money, but I'm sure if it were that good, they might make a go of it themselves and retire.  I would hold fast my valuables when dealing with a salesman, I mean "economist" who's driving the free money train.

I think for the sake of science the first option should have proper noun in it, just to make things fair.  Let us assume Ludwig von Mises had established a set of economic rules, with the intended effect of netting you more money.  I have no idea what these would be, but if it were me i would stop throwing good money after bad, and deal in commodities.  What was gold trading 4 years ago?  Has Delong tripled his portfolio in that time?  I know ammo and gas has sure gotten expensive.  So has prime time advertising.

Silly experiment aside, most people think of inflation in terms of what it costs them personally, calculated in the consumer price index.  Which no longer includes energy and food and who knows what other "volatile markets" that make us look bad.  The truth is, economic rules are not written by delong, or krugman, or von mises, or even congress, or the IMF.  Economic rules are carved in stone every day by ordinary people carrying on in the course of every day life. 

That is more of a micro-econ scenario.  In macro terms, for all intents and purposes Spain actually is bank.  The idea that common sense dictates cuts in spending and raising taxes is absurd.  That GDP would fall as a result is obvious.  The keynesian model most widely used to direct the economy would have government spending directly proportional to personal income.  Basically you are reducing the largest order for goods and services, bloated and unnecessary though it may be, and at the same time, requiring more money from the providers in taxes. 

Oh, and where I live, you do not have to prove citizenship to do anything.  Not for drivers license, not to vote, they have job centers.  There are all kinds of welfare programs that require no proof of citizenship.  What you are advocating whether you are aware or not, is single payer healthcare.  If you want your GM Health Care, you prove you are a citizen to get a subsidy? 

Stick to your talking points and fluff pieces indicating the economy.  Non response to appeals for clarity and common sense is, I suppose, a noble position from your perspective. 

In case you can't tell, I've heard there were some feathers ruffled in the Off topic forum, and was seriously depressed that I was not at the root of it.   ;)


 

[Brian Moffet]

I like how a post on common sense lead to experiments in economics, I took some econ in college, and was blessed by God with sense.  It can't be that hard, it's all butter and guns, right?

At the macro level?  No.  And I am not completely sure of who your audience is, you jump around quite a bit.  Perhaps if you provided clarity on that, it might be helpful  ;D

[JohnAMcG]

To be clear,

I cannot find one "fact" printed by you to have any basis in reality.  Your "experiment" is based on a false premise, and clearly authored spontaneously by yourself, most likely under the influence.  You are totally dismissive and bigoted about others valuable opinions while providing only links to vaguely worded internet rags that no one has ever heard of, written by self appointed intellectuals that no one has ever heard of, to add legitimacy to your insults.  You seem incapable of even acknowledging a challenge to your "logic" or "facts", such as the your last post, US Monetary Supply, the Spanish national Debt and GDP, the definition of inflation, the inherit bias in your "experiment", that are readily available to anyone here.  You seem to lurk in the corners waiting for a joke or comment that upsets your delicate sensibilities, and then lash out with talking points and links, bullying a conversation.  At times, when you go off script, it is as if English is not your native language. 

PS If you look up Butter and Guns, the first two words you will see are "In Macroeconomics..."

PPS If you were unsure of my audience, why did you reply so quickly. 

[Brian Moffet]

John,

Wow.