Socratic Paradox
How should we know that we do not know? (οἶδα οὐδὲ οἴομαι εἰδέναι)
Last week I shared my analysis of how quantitative easing works.
As a follow-up, I might pose the question, “what are the effects of quantitative easing on the economy?”
And my answer to that question would be, “broadly speaking, the effects of quantitative easing are emergent and, as yet, unclear”.
But that answer is a cop out. Despite being rooted in intellectual humility, indeterminate answers are unsatisfying. Indeterminate answers can even be unhelpful. After all, policymakers and leaders, like the Bank of England Monetary Policy Committee, must still make choices even in the face of uncertainty. In those instances, imperfect decisions, made thoughtfully with incomplete information, are often better than paralysis in the face of uncertainty.
That said, we still benefit from foregrounding the ‘Socratic paradox’, by which I mean ‘stating that we know that we do not know’:
…[ὅτι] ἃ μὴ οἶδα οὐδὲ οἴομαι εἰδέναι.
I know that I know nothing.
The character of Socrates, Plato, Apologia 21d
In any aspect of life, it is all too easy to assert a view confidently and forget that, when all is said and done, we simply do not know the nature of reality.
How on earth would a bipedal ape sat in front of a screen be able to assess the fractal consequences of an intangible series of digital financial transactions?
This is particularly the case when the experts in a subject - in this case central bankers - themselves admit that they do not know (although not necessarily in public):
The FOMC [Federal Open Market Committee] do not know why [QE] works or how it works. They don’t have enough data points on it working well. They can’t talk about that much in public because they don’t want to unsettle markets or themselves . . .
Claudia Sahm, former Fed economist, in Unhedged, February 2022
When even policymakers with access to the highest quality information do not know how quantitative easing works, that should give us pause to reflect that we probably do not know the answers to these questions either.
Likewise, a quick search on a well-known database of scholarly research yields 1,170 papers on quantitative easing. At the end of the day, I am a finite being. I only have the time to read a few of these pieces, so what can I really determine with any certainty?
Yet, such is our human condition. In pursuit of progress, our optimism drives us inexorably towards an assertion, a hypothesis around which to test and challenge our views through analysis.
And I am all for that.
Thanks for reading. I have been absent over summer but intending to get back to regular posting.
As always, please reply if you have comments, questions or suggestions. Please help me identify my errors so that I am able to update my priors. Do not hesitate to reach out.
Subscribe to receive new editions of this Substack, delivered directly to your inbox.
I look forward to hearing from you.
~ N
