The Problem of Certainty in Uncertain Times

While reading one of my favorite blogs and podcasts, Planet Money, I was introduced to the recently released hip-hop video entitled “Fear the Boom and Bust - a Hayek vs Keynes Rap Anthem”. In a very simple way, this mock battle-rap distills and contrasts two complicated economic theories in a fun and amusing way, and, in a larger sense, the video mirrors the great economic debate that is at the top of our economic agenda: regulation vs. deregulation; market interventions vs. free markets.

However, while watching the video, I was struck with the certainty that each economist communicated the supremacy of their theory (albeit, through their rapping actor stand-ins). I never met F. A. Hayek or John Maynard Keynes, but I imagine they, like many philosophers or academics, possessed an absolute certainty with the Truth of their positions (and corresponding rejection of any idea that may refute their position) that is similar to today’s rappers. It is a similar belief in one’s own certainty that has polarized otherwise civil discussions about the problems confronting our country today.

For instance, five years ago, some of the best mathematical thinkers (or “quants”) in the world were absolutely certain that mortgage-backed securities would do nothing but grow exponentially for the indefinite future. As we since learned, this new type of investment was so new that we could not accurately predict how they would perform in the future. (see page 10)

Similarly, economist Richard Florida developed a strategy to help post-industrial cities transform their economies from stagnant manufacturing hubs to centers of knowledge-based workers. Inspired by the certainty of the proposed success of his strategy, so many cities and public servants around the country adopted his strategy of The Rise of the Creative Class to change their governing policies that this idea grew into a broad movement. These cities are now facing a dose of reality, as Mr. Florida has since updated his theory to assert that, "We need to be clear that ultimately, we can't stop the decline of some places and that we would be foolish to try." And this debate continues.

Towards the end of the “Fear the Boom and Bust” video, two quotes from Hayek and Keynes are presented on the screen:

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”- John Maynard Keynes, The General Theory of Employment, Interest and Money

“The curious task of economics is to demonstrate to men how little they know about what they imagine they can design.” - F. A. Hayek, The Fatal Conceit

While these two quotes come from two great thinkers, each certain he is right and the other is wrong, it seems that each is telling us: nothing is certain, and don’t believe anyone who tells you otherwise.