Bryan Caplan  

Sunburn, TARP, and the Activist's Fallacy

Retirement Risk... Trend vs. Random Walk...
Like Conan O'Brien, I don't tan in the sun; I burst into flames.  The most painful moments in my life have been due to sunburn.  I was burned so bad in 1981 that I didn't get another until 1994 - when I made the mistake of lotioning my own back before snorkeling.  And I was burned so bad in 1994 that I didn't get another serious burn until two weeks ago at Hurricane Harbor.  (Apparently my "waterproof" sunscreen wasn't all that waterproof).

While suffering, though, I achieved enlightenment.  In my anguish, my constant thought was, "Must do something or other about this!"  Rationally, I realized that any action I took would be ineffective or counter-productive.  I've tried it all; nothing works better than nothing.  But my skin kept screaming at me to try something... anything.  And through my pain, I finally understood the TARP mentality of 2008.

Call it the Activist's Fallacy: "Something must be done; this is something; therefore, this must be done."  It's inane.  But when your body's on fire - or you see the economy collapsing in your mind's eye - this silly syllogism becomes a siren song.

The right response, of course, is to steel yourself against the Activist's Fallacy before the crisis arrives.  Drill yourself with the courage to sit idly by.  You might even build up enough surplus discipline to urge the frantic people around you to do the same.  It's tough, but it's better than something.

Oh, and triple-check your sunscreen.

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COMMENTS (13 to date)
razib writes:

bryan caplan, so white it burns....

agnostic writes:

This provides a great analogy for how to robustify ourselves (in Taleb's phrase) to large deviations in the larger economy.

Everyone tans unless they're an albino. So how is it that you don't end up tanning? By insulating yourself from the sun for 50 weeks a year, then going all-out during summer vacation when the sun is strongest. This is like someone going 50 weeks of the year without any physical activity, walking into a boxing gym, and asking to fight the champ. They will get pulverized.

Maybe they wear heavy body gear, analogous to sunscreen, but how can they be certain it will protect against all possible damages? They can't. Therefore, they may be able to escape fairly unscathed year after year, but at some point they forget to fasten the gear the right way, the protective stuff has worn out a little bit, or the champ gets better, etc. -- and suddenly they are unprotected. Like when you forget your sunscreen or don't put enough on, after 50 weeks of hiding from the sun. That's when they get killed, or when you get burnt to a crisp.

Your own description shows that you've moved yourself into Extremistan with complex payoffs -- long periods of low volatility in how sunburned you are, then a once-every-10-years explosion for a week or so where you nearly drop dead.

Obviously this is not how human beings have lived. They live in Mediocristan where they may get more or less burned than some average, but where they're never going to burst into flames. Why? Because they spent most of the year exposed to sun, seeking shade when it got too hot. Their exposure to sun is normally distributed -- say, 3 +/- 2 hours per day -- whereas yours is a highly skewed power-law distribution -- most of the 365 days are below 1 hour, a small handful are between 1 and 3, then you have 10 vacation days where it's between 6 to 10 hours.

They gradually build up a tan so that by the time the super-strong summer rays hit them, they're toughened up to them and don't catch fire. You get scorched at regular intervals.

agnostic writes:

So what's the solution? *Not* to steel our nerves for the eventual blow-up, but to robustify ourselves as much as possible before that, so we won't be in such a bad state and feel tempted to Do Something, however silly.

In the sunburn case, it's simple -- just move from Extremistan to Mediocristan by making your daily exposure to sun become normally distributed (e.g., get X +/- Y hours each day), rather than go most of the year hiding from the sun and then a small number of days fully exposed to its maximum strength. The former is how mother nature intended it, and how humans have lived forever, until we started working and even spending leisure time indoors.

Even if you couldn't change the distribution of exposure, you could still robustify yourself by limiting the scale of potential damages. If banks can borrow as much as they want, the sky is the limit for how horribly things can blow up. Similarly, if you stay out in the sun for nearly the whole day on vacation, there's no limit to the damage your skin can get. Limiting sun exposure even on vacation will keep the potential for boiled-lobster skin manageable.

The solution then is to keep banks from leveraging out the wazoo, and keeping those who normally avoid the sun from staying out all day long on vacation -- no matter if they have sunscreen, and no matter if the banks have reassurances from ratings agencies. Move the payoffs from more complex ones like expectations (probability of damages times severity of damages) to just a simple raw probability (burnt or not burnt).

Doc Merlin writes:

That fits the Austrian story that monetary stimulus during a recession can help that recession, but it will make the next one worse.

Foobarista writes:

How about wearing a quick-dry high-SPF shirt while snorkeling? I'm no slouch in the sunburn department, but these work well, even when hiking at 10,000 feet or snorkeling. Get a light gray or white one - dark ones are too hot.

There's no commandment that says "thou shall go shirtless" :)

Richard A. writes:

For sunburn, take an antihistamine such as Benadryl. It may cause drowsiness.

William Barghest writes:

"The right response, of course, is to steel yourself against the Activist's Fallacy before the crisis arrives. Drill yourself with the courage to sit idly by."

And show everyone how little you care about them?
Such nonsense.

Keith E writes:

Let me add one more analogy. Think of the shower faucet where you adjust the hot water setting and wait to see how the water temperature changes. If the delay is not too great, it is relatively simple to adjust the water temperature to the desired level.

Now think of TARP and other intervention policies. Sometimes it may take months or even years for the policy adjustment to alter world events. In the mean time, other policy adjustments are taken. Because of the delays involved and the difficulty in isolating cause and effect, it is virtually impossible for the actor to fully learn and understand the results of their interventions.

Policy makers have power to intervene but not the competence to do so wisely (it is likely that no human has the competence to implement TARP and similar interventions wisely). To bring competence and power in line with each other, we really need to limit power accumulated by individuals and organizations, including government.

Hyena writes:

So... pain alleviation/TARP counts as activism but "check your sunblock"/"steeling oneself" doesn't?

The conclusion you seem to suggest is that we should do something to avoid being burned rather than try to salve the pain once it's been inflicted.

That's a defensible position, but nothing really suggests fallacious reasoning in TARP.

Bill writes:

At this point, a coating of chilled aloe is like the market. You won't get immediate relief, but it will get you to a better place faster.

donald brown writes:

As Bill said, next time try an aloe vera leaf.
A live plant - not some lotion based on it.
Break or cut the leaf and smear the gel on the
burn. It really works.

Liam writes:

I too am whiter than Casper the Friendly Ghost and am so white I can actually be seen at night from space. The only thing I know that works is moisturizer and codeine. Seriously. See your doctor. They won't let you suffer.

sean s. writes:

How do we get the politicians to tie themselves to the mast, when it is so strongly against their self-interest to do so?

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