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this post was submitted on 17 Oct 2023
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Right, but if you're watching someone blow up a balloon, you know eventually it will pop even if you don't know exactly when. That doesn't mean you're wrong to suggest we should stop inflating the balloon to avoid the pop.
If you just say the market will crash, maybe it will or maybe it won't. If you say that the conditions exist for a crash, and describe them accurately, you're right whether there is a crash or not.
And if you say there's 100% chance, not only are you likely to be wrong, you're also a useless moron deserving of ridicule.
There are two problems with this.
1: When a lot of people are making money by inflating the balloon, telling them to stop is not going to work well.
2: If the ballon ends up taking 20 breaths to pop and you are telling them to stop every time they blow in the ballon and it doesn't for the first 19 times, they tend to think you are the boy who cried wolf and just keep on ignoring you.
You're right, that's why you need legislation and regulation to prevent them from blowing up the balloon. The people pointing out the causal relationship aren't necessarily in a position to do that themselves, they need to raise awareness so that there is sufficient concern to do something about it. That ain't happening as long as bribery is legal, but that's not the economist's fault.
That's also not the economist's fault. Raising the alarm and accurately predicting the causes of a crash are the things the economist are supposed to do. The boy who cried wolf was pretending when he raised the alarm. The economist is accurately describing the state of affairs, and the potential ramifications. Whether it takes 20 breaths or 100, the balloon will pop unless we take action and that remains true. If the boy who cried wolf saw wolves, and the wolves didn't attack the sheep the first night, the boy is still doing his job to warn people. To torture this analogy a bit more, it's like everyone can see the approaching wolves, and it is the townspeople who are the idiots for not believing the boy.
While broadly, I agree with your assessment, there is one issue I see. With each breath into the balloon, it gets closer to popping, but the beginning state of every balloon is empty and we WANT it to grow to a certain degree. If we go with 20 blows for instance, we WANT 10 of those. If you (economists) keep reminding the Blowers on each blow, then yeah, they'll start to ignore you by blow 10. If instead we were to say, at blow 8, "hey, we're about blown out, don't blow too much more" it may do more good than shouting each time someone's blowing.
And if you can make money by getting as close as possible to the pop while still stopping in time, many people will take that gamble