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Pessimistic about Pessimism
Things are getting better. Democrats can’t ruin it. Republicans can’t ruin it. Voters can’t ruin it. People are getting vastly richer. Our children will be far better off than we are, no matter how insurmountable the national debt seems to be. Just think about technology. Even if wages stay constant, the things that people buy will get cheaper, and food and energy will continue to be ever-shrinking portions of our budgets.
Morgan Housel wrote an article for The Motley Fool that expresses this perfectly, and has a wonderful explanation for the allure of intelligence surrounding pessimism. Check out this graph (logarithmic, mind you). It’s the ultimate example of “climbing the wall of worry.”
So why are people drawn to pessimism? Housel give five reasons:
1. Optimism appears oblivious to risks, so by default pessimism looks more intelligent. But that’s a wrong way to view optimists. Most optimists will tell you things will get ugly, that we’ll have recessions, bear markets, wars, panics, and pandemics. But they remain optimistic because they set themselves up in portfolio, career, and disposition to endure those downsides. To the pessimist, a bad event is the end of the story. To the optimist it’s a slow chapter in an otherwise excellent book. The difference between an optimist and a pessimist often comes down to endurance and time frame.
2. Pessimism shows that not everything is moving in the right direction, which helps you rationalize the personal shortcomings we all have. Misery loves company, as they say. Realizing that things outside your control could be the cause of your own problems is a comforting feeling, so we’re attracted to it.
3. Pessimism requires action, whereas optimism means staying the course. Pessimism is “Sell, get out, run,” which grabs your attention because it’s an action you need to take right now. You don’t want to read the article later or skim over the details, because you might get hurt. Optimism is mostly, “Don’t worry, stay the course, we’ll be alright,” which is easy to ignore since it doesn’t require doing anything.
4. Optimism sounds like a sales pitch, while pessimism sounds like someone trying to help you. And that’s often the truth. But in general, most of the time, optimism is the correct default setting, and pessimism can be as big a sales pitch as anything – especially if it’s around emotional topics like money and politics.
5. Pessimists extrapolate present trends without accounting for how reliably markets adapt. That’s important, because pessimistic views often start with a foundation of rational analysis, so the warning appears as reasonable as it is scary.
In reality, the optimists are consistently correct over the medium term. As with the weather, if you don’t like current events, give it a little time and they will change. But chances are the pessimist will have latched on to something new that spells doom for us all.
Don’t be like them. Let the Left worry about the end of the world. Don’t let the election trouble you. Things are getting ever better, despite ignorant people doing everything in their power to stop it.
Published in Politics
What makes me pessimistic about this graph is that we are currently above the long term trend line.
Letters from Rome circa 476.
What makes you say that? It looks to me like there might be a small secular increase in the exponential growth.
There are many reasons to believe that the cultures are not comparable over such an incredible length of time. I wonder how much equating vague allusions to history with prophecy correlates with pessimism.
Mike, it’s worse than that. We are above the 200 year trend line and the line in the last 10 years is roughly flat indicating a possible decrease in standards of living.
I don’t see a drop in standards of living coming, what I see is the end of growth in standards of living in the US. The next century or two will be about bringing the rest of the world up to the US standard of living. Not exactly Mad Max, but not exciting either.
I hope you optimism is correct, but you know the old saying about pessimists: They are always happy. If they are wrong, they are happy that they were wrong. If they are right, at least they can be happy that they were right.
I’m more concerned with being right, full stop.
I don’t see IRS and regulatory abuse on that graph. Are people saying they’re no problem as long as we have more and cheaper material things?
Victims of our own success? While enhanced standards of living for others may not be overtly exciting to Americans who already enjoy those standards they are very exciting to the people experiencing them. Also the very process of catch up by the third world will give us access to new goods and services as these nations finally become able to export their goods and crafts to us. Wealth is the stuff you have and the stuff you can buy. A modernized world will by necessity have more stuff in it for all to consume. We will be richer.
I don’t think so, but many “material things” increase our freedom, if for no other reason than they let us do things we previously could not do, though they often make it easier to circumvent government as well.
Even as government does ever more increasingly abominable things that are immoral and should never happen, life gets ever better. At least, that’s been obvious during my life.
I can’t like this enough times!
If you need a graph to prove to a person how great they are doing, then they are not.
There is one word of caution to be interjected into this optimism. One of the key factors to contributing to economic success has been the spread to classical liberal ideals throughout the world. Nation generally conforming to these ideals have formed the basis for technological development and wealth generation. In nations that have adopted illiberal ideal progress and wealth creation was severely retarded. In the 20th century we managed to square off and defeat two monstrous ideologies which had they become dominant across the world would surely have curtailed the growth seen in that chart. We were vigilant, and lucky. We need to stay that way. We can’t really control luck, but it is important to remain vigilant and determined in defense of liberalism. It has served us well for nearly three centuries, and prosperity is not likely in its absence.
John, I loved meeting you, but I think sometimes people do need to be reminded how good they have it because humans are notorious for acclimating to their status quo.
I like graphs. They give me comfort and joy in sad times.
This is true. I am going out on something of a limb and betting technology and morality (classical liberalism) continue to improve quickly enough that what we are seeing continues at the same pace.
The thing is that “classical liberalism” goes by another name, “truth.” And I believe truth has a way of convincing people in the long run.
They do?
How does that help our kids get experience working on a farm, for example, where one can learn all sorts of interesting things while working with dangerous tools, all of which is prohibited by government now? How can more material things restore the possibilities of experiences that have been prohibited by government?
How do more material things help a family be strongly tied together through life and death decisions made together, when the possibility of those relationships and those decisions has been taken away by government?
A cause for pessimism is that people will no longer even know of the rich experiences and relationships they are missing in life, because their idea of life is constrained in a narrow, materialistic way.
Thanks Mike, I’m an optimist too. I think pessimism is plain un-american.
The more people understand that they are human beings, with amazing capacity for self-determination the more optimistic they become (and the more successful) .
The more they think they’re just the playthings of vast, conspiratorial forces at work, the less they become (I think the extreme version of this is the most abject immaturity).
I think the belief in the self-determining individual is imprinted deeper into the American spirit than current politics suggest.
Often, the first question an American child is asked by an adult that requires any thought is: what do you want to be when you grow up?
Often, the first semi-sophisticated retort is “it’s a free country!”
Often, the first historical event we learn to marvel at is an odds-beating revolution fought for the sake of self-government.
These might just be silly anecdotes, but I think it unveils something unambiguously good about our country. Optimism is our culture.
Passing laws aren’t the same thing as enforcing laws. I know many farmers with children and I don’t hear about a lot of government officials bothering to drive out to the boonies to ruin their fun. My cousin’s son’s first word was “combine” for G-d’s sake. Government is restricted by physics and interest the same way as the rest of us and lucky for us, accept for a few well publicised examples, seems to be fairly loosely enforced.
Does it suck that the risk for government intervention is there? Of course, but we live with risks in all aspects of life. Government risk is simply and immoral, avoidable type.
Healthcare (and everything else government ruins) is something that I hope to be reversed in the future, but I still think in most cases people are able to make appropriate decisions. Again, news emphasizes the most egregious examples to the contrary. That’s how they make their money.
Maybe I’m naive, but I think plenty of people have a non-materialistic view of the world. Maybe it’s a minority, but does that really matter? Doesn’t it matter than there is a healthy core of people who believe the right things and experience the right things? Do we really need to seek for everyone or a majority of people to experience the best experiences to feel fulfilled? I’m happy to live in my bubble with my family and my Ricochet extended family who all know the truth and experience it better than most other people.
I wasn’t born and raised on a farm. It is impossible for children now to have the kind of experiences I had. In part this is because farms are now industrial operations. But there are other examples. The rules at my workplace, a university field station, changed due to government requirements, such that high school kids can no longer have the kind of working experiences they used to have.
This changed while my kids were growing up. The younger ones no longer could have some of the same work experiences the older ones had, thanks to intrusive government.
Too bad for the poor saps who are affected by these changes. Because there are some who are not affected; therefore other people’s problems don’t exist, I guess.
And this is just one of a zillion ways things have changed.
It looks like some people read Aldous Huxley and mistook it for an instruction manual. I have run into young leftwingers who used it that way; I didn’t know there were conservatives who made that same mistake.
Testify, Mike!
With you 100%.
Economic and Technological success are ultimately dependent on institutions (if only to ensure that the governments stay out of the way) and institutions in turn will eventually come to reflect the character of the people. Ask yourself, what institutions would 21st century Americans establish if the constitution were abolished today and the people were given a blank slate and allowed to replace it with one more to their liking? Things were looking pretty good during the Antonine empire, yet many at the top could not escape the creeping suspicion that their success rested upon the achievements of past generations whose character they could not hope to equal. Despite many schemes to reinstitute republican virtue from above, servile habits once learned could not be unlearned and little more than a century after Marcus Aurelius’ death the already antiquated citizen emperors of the principate were replaced with the slave masters of 4th century dominate.
Assuming that there is not something about the internal logic of our current culture and education system that would preclude a return to patriotism and economic literacy (to name only two…) does anyone seriously think that the necessary changes could be made in time to avoid the consequences of several generations entering the electorate who have been undereducated and/or purposefully indoctrinated?
Okay, so it’s 4 AM and no one is reading, so I’ll take the opportunity to anticipate some of the criticisms of my last comment. Mike writes about pessimism as a way of signaling intelligence and sophistication. I think that’s mostly right, but I think it also applies to skepticism toward narratives of civic virtue. To moderns skepticism of such theories sounds world wise and discerning while acceptance gives off an aura of overdone moralism which is unbearably preachy to most people. I suspect this has something to do why most modern scholars dismiss character based explanations for the decline of Roman civilization despite their overwhelming popularity with the ancients. It’s important to keep in mind that none of this actually has any bearing on the plausibility of the virtue narrative either for ancient societies or our own.
When you say “Real GDP,” does that mean adjusted for inflation?
That’s theoretically what it’s supposed to mean. Don’t forget that GDP includes real goods and services AND government expenditures. (All the people on welfare increase the GDP, while doing nothing productive)
However, since the US government ties many things to inflation, it has intentionally understated inflation for the last 40 years or so. Examples include cost-of-living raises for Social Security and your tax bracket creep, which reduces expenditures and increase revenues.
For many items, such as washing machines, refrigerators, etc., as the purchase costs go (relatively) down, the quality / lifetime service of the items are usually also reduced – witness the so-called “Energy Star” appliances that use smaller motors that burn out quicker. Inflation statistics have a difficult time keeping quality constant over time.
We have a refrigerator that we’ve owned for 20 or 25 years. The salesmen tell us to use it until it fails; the new ones are designed to only last 8 or 10 years.
That sounds a lot like “the right side of history”, as if there’s an inevitability to progress that nothing can stop.
As Robert Heinlein said:
“Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.
This is known as “bad luck.”
You are correct. The graph shows a big increase during WWII. A whole lot of government money was spent. Certainly the standard of living didn’t increase because of it.
Before consuming a graph of real GDP ask the author a question: What is the factor by which Nominal GDP is adjusted to formulate Real GDP?
If they can’t answer the question discard their analysis.
If they believe there is a single factor/measure that does so accurately ask them to explain its utility. If you are satisfied with their answer immediately surrender all your capital to them as your new money manager/advisor for you have discovered true genius. If they cannot then discard their analysis.
The slope of that graph is relatively constant, and impressively positive. However, recently many changes have occurred that put downward pressure on that slope. Given the popularity of Bernie’s ideas, I fear the slope will be significantly be reduced in the future.