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How do we know something is true?

Summary:
Like Richard Rorty, I’m skeptical of any grand theory of epistemology. We believe things when we find the arguments/evidence persuasive. There’s not much more that can be said.Let’s take an example from yesterday’s media: One expert is calling for a second round of stimulus checks to offset the financial strife experienced by struggling American during the coronavirus pandemic. Forget about the stimulus checks, I’m interested in the question of whether Americans are “struggling”. Is that true? (Yes, I know that I’m a really bad person for even asking that question. Tens of millions are unemployed and there’s rioting in the streets. But I’m 64 years old, so what do I care what people think of me?) So let’s think about how we’d know if Americans are

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Like Richard Rorty, I’m skeptical of any grand theory of epistemology. We believe things when we find the arguments/evidence persuasive. There’s not much more that can be said.

Let’s take an example from yesterday’s media:

One expert is calling for a second round of stimulus checks to offset the financial strife experienced by struggling American during the coronavirus pandemic.

Forget about the stimulus checks, I’m interested in the question of whether Americans are “struggling”. Is that true?

(Yes, I know that I’m a really bad person for even asking that question. Tens of millions are unemployed and there’s rioting in the streets. But I’m 64 years old, so what do I care what people think of me?)

So let’s think about how we’d know if Americans are struggling:

1. In a country of 330 million people there will always be many people who are struggling. But I’m interested in whether they are struggling more than usual.

2. You’d think that Americans would be struggling much more than usual (say much more than in 2019) given the 15% to 20% unemployment rate expected to be reported on Friday, as well as the huge drop in output. After all, the circular flow diagram teaches us that aggregate output equals aggregate income.

3. But there are some puzzles. April saw by far the largest increase in personal income ever seen in America. That’s not normal for a month that is likely to end up being the absolute trough of the 2020 depression. And saying it’s “not normal” during a depression is an epic understatement.

How do we know something is true?

So how are we supposed to determine if Americans are struggling? I can look at the income data, but I don’t see it. Or I can consider the people that I know personally. A few are struggling, but no more than usual. Most are not struggling. Or I can rely on the news media. But would you expect ABC/NBC/CBS/CNN news to do a report claiming, “we’ve determined that contrary to widespread impression, Americans are not struggling.” Even if they privately believed it to be true?

It turns out that it is really hard to figure out whether Americans are struggling; at least right now it’s difficult.

In the end, I suspect that Americans really are struggling more than usual, as the aggregate income data hides a big increase in variance. Lots of small businesses are seeing big losses. And even unemployed workers that are fully compensated with the expanded unemployment compensation program face psychological stress, uncertainty about what the future holds.

If you think Rorty and I are wrong about knowledge, and that there’s an objective, scientific way to figure out whether Americans are suffering, then won’t you end up using the official personal income data? Isn’t that the most objective data that we have? And if so, doesn’t that mean Americans are seeing a wonderful surge in income beyond our wildest dreams?

Or, is the world so complicated that no one method is best, and we need to consider all sorts of evidence, some quite intangible and hard to put into words? Knowledge is what we believe to be true.

I believe that people are struggling.


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Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment".

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