Taleb on education

I’m currently reading Nassim Taleb’s Antifragility: Things That Gain From Disorder. I’m enjoying it and recommend it. There is much to discuss.

I ran into this today:

Authors theorize about some ancestry of my ideas, as if people read books then developed ideas, not wondering whether perhaps it is the other way around; people look for books that support their mental program.

Agreed. That sets up a section about education that ties in with a recent discussion about education on this blog. He introduces what he calls epiphenomenom, which is

…mistaking the merely associative for the causal; that is, if rich countries are educated, immediately inferring that education makes a country rich, without even checking.

He refers to work from Lant Pritchett (recent EconTalk guest) and Alison Wolf that supports that education is a marker of a wealthy country, not necessarily a cause (wealthy countries can afford education). I liked this story:

I once ran into Alison Wolf at a party (parties are great for optionality). As I got her to explain to other people her evidence about the lack of effectiveness of funding formal education, one person got frustrated with our skepticism. Wolf’s answer to him was “real education is this,” pointing at the room full of people chatting.

Taleb is clear in that he is not saying that education and knowledge are not important to an individual, it’s just oversold as a cause of a nation’s wealth. I also agree with this (emphasis mine):

…note that I am not saying that universities do not generate knowledge at all or do not help growth (outside, of course, of most standard economics and other superstitions that set us back); all I am saying is that their role is overly hyped-up and that their members seem to exploit some of our gullibility in establishing wrong causal links, mostly superficial expressions.

That puts into words something I’ve often thought about credentials. In so many areas credentials play on our gullibility and the folks with the credentials seem okay with that, which is a reason I have an inherent distrust for someone who rests on their credentials. You don’t often hear people qualify their credential and caution you to not put that much weight into it. They usually appeal to it.

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Toughen up

1. Milton Friedman’s comment, “Capitalism is a profit and loss system. Profit encourages risk-taking. Loss encourages prudence.”

2. Nassim Taleb, author of the Black Swan and Fooled by Randomness, released the prologue of his new book on Anti-Fragility online. In it, he expounds on Friedman’s point:

Which brings us to the largest fragilizer of society, and greatest generator of crises, absence of “skin in the game.” Some become antifragile at expense to others by getting the upside (or gains) from volatility, variations and disorder and exposing others to the downside risks of losses or harm from them.

In the housing crisis, losses were spread to other parties — investors in mortgages and ultimately to taxpayers — while the upside was retained by the bankers. This caused the bankers to exercise less prudence. How many lottery tickets would you buy if someone else was paying? Likely many more than you would buy on your own.

Then Taleb makes an even more important point:

And such antifragility-at-the-cost-of-fragility-of-others is hidden — given the blindness to antifragility by the Soviet-Harvard intellectual circles, this asymmetry is rarely identified and never taught.

Very few people see this. They even blame the problems on capitalism, never realizing that  spreading losses across taxpayers is not capitalism.

3. A blog post from the Wall Street Journal: Half of U.S. Lives in Household Getting [Federal Government] Benefits.  And, we’re not talking about benefits like driving on Federally-funded roads or sending a child to a public school that receives some Federal funds. No. We’re talking about getting a direct benefit from the government.

I’m guessing that Friedman and Taleb would suggest that this doesn’t end well.

Friedman might say that we are removing losses and therefore, removing prudence. Taleb might say that we are letting people gamble without having “skin in the game”.

Ultimately, this leads to folks taking risks they wouldn’t take if they had to pay the loss. This is dangerous itself. But, it also leads to something else that is even more dangerous. The loss of resilience, hardiness, grit and adaptability.