Thursday, October 8, 2009

Mistakes and the Economy

Gevlon has a post over on his blog about the common concept often referred to as "Mistakes were made (but not by me)". Usually, I'm not a big fan of his positions, though his thoughts can be very illuminating in attempts to understand different points of view. However, I think he has some interesting points, even he was a bit undiplomatic.

To summarize, when a human is presented with a contradiction, they generally have to solve it in some way. True, sometimes they simply avoid it, but that's not always possible. One of the most typical contradictions is the concept of being wrong. We're generally programmed to be confident; in fact, I would argue that it's a survival instinct. Few people get stuff done by doing it half-heartedly, so when we do something, we need to be confident that we are doing the "right" thing. However, if it turns out that it was the "wrong" thing to do, we're faced with this contradiction.

There are many ways that people deal with it. Generally, they either change their paradigm in some way, or they don't. If they do change, it could lead to a lowering of confidence, perhaps depression as an extreme example, or it could lead to them simply changing their behavior and knowledge, and moving on. However, some people don't change their paradigm when confronted with a problem. The most common instance of this is avoiding responsibility. If they can claim that it wasn't their fault, then their view of themself, their self-esteem, is preserved.

That tactic pisses me off. My beliefs stem from the omnipotence of knowledge, and to see someone willfully avoid knowledge in order avoid risk to their self-esteem is beyond frustrating. However, there is a caviat to that: a politician saying "mistakes were made (but not by me)" is a special case of this to me. In other words, in the current climate of politics, it's virtually impossible for a politician to admit having made a mistake, and not be harmed politically by it. In that case, even if they say it, it is possible that they are still admitting to themselves that they made a mistake, they're simply not allowed to admit it publicly. So in that case, my ire is not directed at the individuals, but at the system that forces that sort of behavior.

Which segues somewhat to the next connection I made (with some help from the end of Gevlon's post), which was to the economy. Milton Friedman once said (as I'm sure a lot of economists have said too) that the economy is not just a profit system, it's a profit and loss system. He implied that the two functions are equally important to the economy; I'd like to argue that they're not, loss is more important.

Another way of putting it is this: there are lots of things being done in the world today that make it a better place. Some of them are for profit, some are not. It is possible to get people to do things for the good of all without encouraging them with money. Price and money is a useful tool to encourage activity, but it is not strictly necessary. However, if someone makes a mistake, it's often difficult for them to admit, even to themselves, that they made a mistake (we're talking about large scale stuff here, like building a bridge for a town in the developing world, and it collapses). What makes it worse is that it's not usually considered a morally wrong act, or at least it isn't by the one who does it. If I steal from someone, unless I'm seriously messed up in the head, I know it's a morally wrong thing to do. However, if I convince myself that something wasn't my fault, that I didn't make a mistake, I don't usually have my conscience frowning at me.

That's where money comes back into the picture. No matter how well I've convinced myself that my idea/company/investment is a good idea, if I'm losing money, it doesn't matter. Because profit is (at least in this respect) a completely objective measure of success. And that's what makes it effective even in the face of mistakes, blame games, and self-delusion.

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