Wednesday, December 24, 2008

Cheney’s Double Fallacy

Vice President (for another 25 days) Dick Cheney seems suddenly interested in establishing his “legacy.” Normally media-averse, he has unexpectedly appeared on several talk shows to explain how he has been a terrific vice-president and GW Bush just as terrific.

His argument employs two rhetorical fallacies. The first is the fallacy of future history (also called the “knowing the unknowable” fallacy). This is where a person claims to know what future historians will write about the present. Of course nobody knows that. Political predictions are notoriously inaccurate, and of all speculations one might make, what future historians will write is patently unknowable.

The future history fallacy encourages the listener or reader to recontextualize current events into a larger time scale extending into the future. From that imaginary God’s-eye view, it is suggested, the current events will seem more important than they do now. Since it is merely an exercise of fantasy, this argument is invalid.

Political historians do tend to obsess over presidential administrations, so we can be fairly sure that future histories of this one will be written (of which Cheney and Bush memoirs will probably be among the first out of the chute). However my guess is thatmost non-participant observers will evaluate the Bush-Cheney administration as one of the most incompetent and disastrous of its age. And my guess has as much value as Cheney's since the future is unknowable.

The second rhetorical fallacy deployed by Cheney in his recent interviews is a politicians’ favorite, the straw man. With this pseudo-argument one objects to a statement the other side never made or to a position that the other side does not actually hold. The effect of the fallacy is to deceive the uninformed listener or reader into thinking that the other side does hold the incorrect view. Since deception violates the foundation of legitimate discourse, this argument is invalid.

Cheney’s use of the straw man fallacy is reported in the New York Times of 12/22/08 (“Cheney Defends Bush on President’s Role”). Cheney criticized Vice President-elect Joe Biden, who had remarked that Cheney had been “the most dangerous vice president we’ve had in American history.”

Cheney’s dismissive reply was, “If he wants to diminish the office of vice president, that’s obviously his call.” But did Biden attempt to diminish the office of vice president? Not at all. His remark was directed squarely at Dick Cheney, occupant of that office. Cheney’s strategy was to deflect the criticism by pretending it was a different criticism, one that Biden never made. It is a classic maneuver.

Cheney went on to offer many unsound arguments, such as asserting that “the president “doesn’t have to check with anybody” — not Congress, not the courts — before launching a nuclear attack to defend the nation “because of the nature of the world we live in” since the terrorist strikes of Sept. 11, 2001” (NYT). This assertion contradicts the United States Constitution that Cheney and Bush swore to uphold. That contradiction makes it an unsound argument.

But that is not a fallacy, which is an error in reasoning. It is just a weak, unjustified, unconvincing argument based on inadequate evidence.

It is difficult to decide if Cheney simply cannot reason correctly, or if he uses fallacious arguments deliberately to deceive his audience.

Wednesday, December 10, 2008

Is Deflation Really So Bad?

The U.S. Economic recession is deepening and there is fear now of deflation, a situation where prices fall and so does demand. Normally, if prices fall, people rush in to buy, like the crazy stampedes of shoppers on the day after Thanksgiving.

But now, nobody has enough money, so demand is down. Prices drop, to lure customers and match the lower demand. But that cuts profits so companies slim down, cutting inventory and jobs. Consequently there is less to sell and more people without money. So prices fall further, more jobs are lost, inventory shrinks more. Salaries stagnate because a thousand workers apply for every job, so there is no inflation.

This vicious downward spiral ripples backward through the supply chain to manufacturers and importers, who also slow down, slim down, and lay off workers, further depressing the economy. Deflation ripples out to the housing and credit markets where sellers are under water and buyers can’t get loans. The whole economy comes to a halt and we all die (financially, anyway). That’s the doomsday scenario.

Nouriel Roubini (aka “Doctor Doom”) wrote a column in the Financial Times entitled, “How to Avoid the Horrors of Stagflation.” (FT 12/3/08, p. 13). Stagflation is a paradoxical combination of deflation and inflation. But Roubini does not talk about that, so the headline was probably added by someone who did not get the author’s drift. What he was warning against was spiraling deflation, as described above. He fears that the government’s attempts to inject money into the economy will not be enough, and not soon enough, to avert the horrors of deflation.

But I was thinking (always dangerous). Is deflation really so bad? Okay a lot of jobs would be lost, perhaps millions of them, and that is definitely bad. But let’s put that aside and come back to it in a moment.

People need to buy essentials: Food, medicine, clothing, housing, education. When the price is right, they will buy. When the price is too high they will avoid buying as long as they can and then buy only on the low end. But they will buy. So there will be an economy, even if only at a very low level. Everything cannot stop dead.

What people do not need are jet skis and wide-screen TVs and expensive designer clothes. They do not need expensive food, either restaurant or frozen. People can live without an iPod and they don’t need a vacation in Italy. A family of three does not need a 10,000 square foot home. So people won’t buy those things in a deflationary situation.

Is that so bad? Companies that sell iPods, trips to Italy, fast food and palatial mansions will wither to a fraction of their former size, if they survive at all, to serve a greatly diminished demand.

On the other side, the back of the irrational consumer society would finally be broken. Imagine people spending their time cooking beans in a crock pot, studying for school and dancing at the community center. They do not cruise the malls, which no longer exist anyway. You haven’t had a raise in three years, but on the other hand, your taxes, utilities and rent haven’t increased either, and the price of eggs has dropped by a third. There is less to buy, but there is less you need to buy. Your 401(k) is cut in half, but so is the cost of your retirement, so you are relatively as well-off as you were before the economic collapse.

The whole economy is reset to a slower, lower, more sane level without the frenzy of obsessive consumerism. Prices are stable, wages are stable. Companies grow organically, by innovation and reaching a growing demographic, not by taking on insane amounts of debt to produce products that have to be massively marketed to create artificial demand. We are all rich again, just at a lower absolute number.

What about all those millions who lost jobs back in the grip of the initial deflation (which is now)? The government keeps them afloat until they find their feet. They get other jobs, at a fraction of what they were making before, but they also cut their spending to a fraction, and as prices and demand equilibrate, they become as comfortable as they ever were, without all the “stuff.”

What’s wrong with this vision of economic post-apocalyptic utopia? Only human nature. People want snowmobiles and expensive handbags. It doesn’t make any economic sense, but that’s how it is. If you try to prevent these aspirations, as the communists did, it only postpones the inevitable and makes everyone miserable in the meantime. Human nature is part of Mother Nature, with whom one should not fool.

So frenzied consumerism, entrepreneurial excess, and wallet-busting inflation will be back. There is no chance society will question whether that is what we really want. I look forward to it.