07 January 2013

Conventional Folly

It is surprising how much of what passes for conventional wisdom is nonsense. Sometimes a quick check of the data is needed but often a moment's thought is enough to see through an idea which is taken for granted in the flow of a discourse, but is in fact not grounded in reality.

Europe's relative decline, which I wrote about recently is a good example. It should be obvious that if developing countries begin to converge economically with rich countries then Europe (or the US or the UK) will command a smaller share of global resources. Yet pundits fret about this change.

There are many other examples. On Twitter recently I encountered the familiar argument that when Britain joined the common market we were joining a trading block not the political and monetary union which the EU has become. You need to know a bit of history to refute that one, but the evidence is only a few clicks away on the internet.

Another one from Twitter was the claim that Britain's prosperity depends on the confidence of international investors. In fact the amount of foreign direct investment into Britain is a fraction of the flow of earnings into the country from British investments overseas.

It is not just in the new media free-for-all that this conventional folly is found. An opinion piece in today's FT claimed, "The eurozone countries are determined to move forward with political integration to save the euro." Everyone knows that political integration is what is needed to save the euro; but will it really and are the eurozone countries really so determined?

In each case conventional wisdom is used to support a political conclusion - in favour of a referendum on Europe, against quitting Europe, or taking a middle position on Europe. A rational debate deserves better.

I should take a bit of time on this blog to expose the folly of conventional beliefs.

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