Counterintuitive

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Counterintuitive

By: John A. Baden, Ph.D.
Posted on May 13, 2009 1

“Things Counterintuitive” is the theme of FREE’s first summer conference. We have invited a select group of economists, mathematicians, free-range intellectuals, and a magician to explore interesting and important counterintuitive truths about nature and human behavior.

Much human behavior is given by nature, immune to pious pronouncements. It is irresponsibly naïve to ignore this reality. Doing so, however, allows special interests to exploit, and indeed generate, confusion between well-intended and advertised hopes for reform with prudent expectations. Ignoring counterintuitive realities can foster political opportunism and crass exploitation.

What may be counterintuitive to the layman may be obvious to the ecologist, engineer, or economist. Truths easily accepted by the innocent voter, and hence exploited by politicians, are often simply wrong. Their practical manifestations are often the exact opposite of political claims. The examples with which I am most comfortable come from economics. Here are two.

In the 1970s, American auto manufacturers first felt the threat of Japanese imports. In 1980, they appealed to Congress for relief. They claimed that the survival of the industry and the preservation of UAW jobs were at stake. Manufacturers requested a numerical limit on imported Japanese cars; 1,680,000 cars per year from Toyota, Nissan, Honda, and Mazda, brands we now know well.

Bill Niskanen, chief economist of Ford, protested the strategy on logical and ethical grounds. Niskanen explained that if the number of cars was fixed, Japanese companies would increase the quality, size, and price of their exports to America.

Nonsense, Ford’s leaders responded. The Japanese could only build “rice burners”—tiny, tinny econo-boxes. They could never compete with Lincoln, Chrysler, or Cadillac. To Detroit’s leaders, Niskanen’s argument was counterintuitive and thus rejected.

When Niskanen didn’t yield, Ford fired him. Another friend, Clay LaForce, Chairman of the UCLA Economics Department, quickly hired him. This was easy; Niskanen not only demonstrated commitment to principle, but also held a Harvard degree and a Chicago education.

I found Niskanen’s example useful when facing a similar conflict between political pressures and principle. Caving in may be expedient, but it is neither morally satisfying nor rewarding in the long run. Further, people with intelligence and character, but few politicians, respect those who hold to counterintuitive arguments when data and logic are on their side.

After Milton Freidman’s death, his student, Thomas Sowell, became my favorite, most respected living economist. (I’d nominate his Knowledge and Decisions for the best book on political economy.) Yet, even Sowell missed a counterintuitive truth.

His new book, A Personal Odyssey, explains why Sowell supported “the idea of minimum wages, as a way of helping low-paid workers to earn a decent living.”

Although his major professor, George Stigler, a Nobel Prize winning economist at Chicago, had argued that minimum wages caused unemployment, Sowell initially found this too counterintuitive to accept. His experience examining the sugar cane industry in Puerto Rico provided a reality check causing him to revise his earlier view.

Few, however, are sufficiently intelligent and principled to resist politically correct, conventional positions. For Sowell, his experience studying sugar cane harvest “caused [him] to realize that government agencies have their own self-interest to look after, regardless of the interests of those for whom a program has been set up.”

Another counterintuitive argument involves Wilderness designation in our region. I’ve been involved in wilderness protection since the mid-1960s when the Forest Service and the Anaconda Company conspired to ravish the Lincoln Backcountry. We won and it’s now the Lincoln Scapegoat Wilderness.

Recently, a 24 million acre Northern Rockies Ecosystem Protection Act has been proposed for roadless National Forest lands in our region. I’ve seen versions of this movie many times. GOP members of the House Natural Resources Committee have, of course, protested saying it would ban “oil exploration and other development.” And of course it would.

Here’s my counterintuitive proposal, one I’ve made for decades, alas, to no avail. In brief, I’ve proposed that these sensitive lands be transferred to non-profit conservation and environmental Green groups. This change in property rights alters incentives and fosters mutually productive actions. This change addresses objections of those fearing a loss of valuable resources, including oil and gas. The logic, however counterintuitive, will ultimately be accepted.

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