How Do You Describe Bad Economics Eeporting?

Clay Shirky over at Crooked Timber:

A couple of weeks ago, my friend Tamar Gendler introduced me to the the problem of easy knowledge, the notion that if you believe a particular assertion, you can produce inductive chains that lead to overstated conclusions. “I own this bike” can be seen as an assertion that the person you bought it from was its previous owner.

But of course you don’t know if that guy in the alley had the right to sell it, so an assertion that you own the bike can generate easy knowledge about whether he did. Instead, “I own this bike” should be seen as shorthand for “If the guy in the alley was the previous rightful owner, then I am its current rightful owner.” (Oddly, this also describes the question of the Elder Wand inHarry Potter Vol. 7, pp 741 ff. Tom Riddle died of easy knowledge.)

I was reminded of easy knowledge while reading Thomas Edsall’s NY Times column on
Can’t We All Be More Like Nordics? Asymmetric Growth and Institutions in an Interdependent World, a paper by the economists Daron Acemoglu, James Robinson and Thierry Verdier. (Acemoglu goes on to discuss this work in a post titled Choosing your own capitalism in a globalised world?.)

In their paper, Acemoglu, Robinson and Verdier model a technologically interdependent world where countries can chose either cutthroat or cuddly capitalism (the US and Sweden being the usual avatars) and each country can be a technological leader or follower but those choices are not orthogonal.

They then examine this model, and discover that:

…interpreting the empirical patterns in light of our theoretical framework, one may claim (with all the usual caveats of course) that the more harmonious and egalitarian Scandinavian societies are made possible because they are able to benefit from and free-ride on the knowledge externalities created by the cutthroat American equilibrium. Not just the US but indeed the whole world would be worse off if we had public health care, because we have to treat poor people badly if Larry Page is to get rich, so that the Swedes can copy us. Because innovation.

Now there’s nothing too surprising in this sentiment—the headline “Neo-Liberalism Woven into Fabric of Universe, say Economists” could have run unaltered in every year since 1977. What is surprising—or at least what Tamar made me see with new eyes—is that the entire exercise is a machine for smuggling easy knowledge into public discourse.