The Magic Formula Fallacy

This is a rant about Magic Formulæ

Just because it works inside your head, doesn’t mean it actually works

It seems to be a staple of geek (or non-geek come to that) politics. The Magic Formula.

– “If we lower taxes on the wealthy, the country will become richer, because the wealthy create wealth”
– “If we execute murderers, it will reduce murder, because that’s one less murderer off the streets”
– “If we legalise pot, drug use will go up, because pot is a gateway drug”
– “It’s ok to torture people because if there’s a ticking bomb like on TV, it might save lives”
– “Anyone who works hard can become rich”

Some are obviously less based-on-lies than others. Some are true – but only within a limited perspective, outside of which they become a lie. eg: “Anyone who works hard can become rich” – yup, but that’s not the point. The point is that the system is set up so most people don’t become rich regardless of how hard they work. Rags to Riches stories are not the basis of sound social or economic policy.

Anyway – Magic Formulas. For geeks it seems to be Libertarianism… particularly American Geeks. Geeks love Game-Theory. Geeks don’t like having to deal with what actual people actually do. Libertarianism a web 2.0-era computer-programmer attempt to “write” a utopianism program. It’s like distributed Das Kapital for people who’s only foray outside the sphere of cable tv, is internet chat rooms.

Libertarianism is a classic Magic Formula. All theory; No evidence.

In fact it isn’t even a theory because it isn’t falsifiable.
In fact it isn’t even an hypothesis because it’s not based on observation.

It’s a magic formula.

The Austrian School specifically ignores empirical evidence (look it up), so no pesky reality need get in the way… which is handy, because I’ve yet to see a single case of libertarianism actually working anywhere. You can see a gradient in fact: the better the social-spending; the better off, and happier the people. Tax is not fucking theft. Tax is us, thinking in terms of “Us” rather than “Me”. If you look at evidence, what you see is that the opposite of libertarianism seems to work best.

The fact that the government has become corrupted by corporate money, doesn’t mean that liberal, secular democracies, with an easily measurable, transparent balance of taxation, don’t produce the best results that we’ve ever seen in the whole of recorded human history. They do.

Libertarianism is a magic formula who’s basic fallacy comes down to the idea that “people are individuals”, when actually, on the whole, they’re not.

Clay Shirky gave us an example of this in one of his talks… parents picking their kids up from school, some would turn up late – so somebody thought it would be a good idea to issue a small fine. That’s the magic formula. “If you financially penalise someone for a behaviour, the behaviour will decline”. Unbeatable… in the tiny mind of the person who’s idea it was. What actually happened was that “the fine” became the price of being late, which was easier for people to pay, than breaking the unspoken social contract they had before, so lateness increased. Unfortunately, when they tried to put things back the way they were before, it made no difference. The social contract once broken, stayed broken.

So what have we got? We’ve got a million different laws based on magic formulas (you have to be a lawyer to understand them all)… we’ve got a whole ecosystem of discourse that is only allowed (by the broadcast media) to take place within the frameworks of magic formulas… and we’ve got well-meaning people, including geeks (who are scientists, so should really know better) providing “solutions” that are all magic formulas.

All conservative political policy is based on Magic Formulas.

Just because it works inside your head, doesn’t mean it actually works.
Just because it works inside your head, doesn’t mean it actually works.
Just because it works inside your head, doesn’t mean it actually works.

Here’s an idea: If a theory isn’t falsifiable, then it shouldn’t be part of any policy conversation.

Policy without evidence needs to be recognised as being speculative – and experiment is great, we should definitely experiment… but policy without evidence needs to be stamped “SPECULATIVE” with a specific expiration-date built into it, so it is rolled back if it fails to meet specific measurable goals. And to minimise the damage that speculative policy can do, it should be conducted on a small scale, with specific focus given to The Amsterdam Effect*.

Never talk about “belief” – just show us the data. Show us your methodology for collecting it. Leave the interpretation to us.


*The Amsterdam Effect is what happens when an experiment is not carried out in isolation – when your neighbours swamp your results. A similar thing happens in Estonia – who’s relative prosperity is not because of their flat-tax rate, but because of their flat-tax rate AND their proximity to Scandinavia.

6 Comments » for The Magic Formula Fallacy
  1. Nick Taylor says:

    Yea – exactly.

    Stats are stats – it’s an imperfect science… but at least the simple act of trying to measure something shifts the emphasis from “what should happen” to “what does happen”.

    Mind you, if you’re talking about social-policy, then the simple act of measuring can have a fairly profound affect on what actually happens. New Labour’s fascination with measuring the fuck out of everything that happens in education was possibly not such a great idea. It basically meant that parents could see which schools produced the best results, which pushed house-prices up in those areas, which effectively created a class-system based on wealth, which was the opposite of what labour should have been about.

    Education is subtle and tricky. Crime, economics etc etc, not so much.

  2. Ed says:

    Ah, Nick,

    Measuring means learning from measuring but economics and politics are intertwined and economics is no science (hence you have to go to Norway to receive a Nobel price in Ecomics while the real sciences go to Sweden). It is more of a religion.

    They do measure the crap out of every “economic parameter” known to men and perform some really nifty algorithms in order to evaluate risk for instance (using Black Scholes which is not that much more, then a complex Monte Carlo analysis) but the then forget that Mr. Sholes hedgefund which was based on these principles tanked in 1998 (only a 4.8 billion write-off, what are we talking about). So in 2007 I had to test software based on these functions:

    and in order to test the software I needed something to test against, so I created a Excel sheet in order to do that (integrating the Monte Carlo tables into the sheet). Now I also knew the limitations of the model full well. It uses market data and these do not take into account the full spectrum of all the possible market moves. Outside the spectrum risks are never taken into account. So if something out of the ordinary happens (like when the East Asian markets crash), option holders are exposed to much more risk then they would like resulting in even more catastrophic faillures, because of rash moves (of men and machine these days).

    And thats is only one of the problems. What these people basicly do is to treat people as if they behaved like brownian body’s, which have no notion about their surroundings and bump into each other in a compleetly stochastic manner. But people do not behave like brownian bodies. People behave like birds, insects or fish in a swarm. No one controls the swarm but it creates a pattern of its own, due to the fact that individual particles of the swarm react to each other in predictable ways (keeping closeness and distance as constant as possible and all thriving to be as the center of the swarm) and transfer this reaction on other parts of the swarm. Unpredictability is introduced due to the fact that these reactions are never perfect (if only due to the fact that not all particles can be at the middle of the flock). Swarm mentality can be very volatile. A small input (like a hawk appearing on the horizon) can cause small reaction in a few birds and the swarm can change its general course in an instant, thus taking birds out of the danger zone that themselves have never seen the hawk. So a small input gets amplified due to the herd behaviour. In a brownian system this would never happen. A brownian system would absorb the input and distribute it like a ripple in a pond.

    Economists should take their time of and study swarm and heard behaviour and learn to includes these into their models.

    Greetings, Ed

  3. Ed says:

    Ah, and the trickle down economics part of Mr. Milton Friedman is explained to the general voter via this little (stupid) comparison.

    “If water rises in a harbor the big boats and the little boats rise alike”

    Now any skipper who has put his boat in a natural tidal harbor knows that is only true from the time that there is enough water to float all the boats to begin with. In a tidal harbor boats get lifted out of the water one by one and guess what mr. Friedman, the small boats float first and the big ones later (needing more water to float). So in an economy were their isn’t an unlimited supply of money (water) small can be better then big. Only when you make a channel for the big boats (and thus steal the small boats water), big boats float earlier but then the small boats rest on the mudflats untill a spring tide (or an economic bubble) comes along……but spring tides usually disappear as fast as they came………now that is what happens exactly in the neo-con economical model. All it’s parameters are skewed in order to steal the water from the small boats. Tax cuts for bigger companies resulting in big companies being able to evade taxes (legally). Outsorcing benifits big companies more then small ones. More advertising potential and so on, and so on. The list is endless.

    Greetings, Ed

  4. Joe says:

    Gun control. A magic formula fallacy that you will not realize because it is ‘conservative’; it doesn’t fit the liberal agenda.

  5. Nick Taylor says:


    Sorry – can’t tell if you’re being sarcastic or not… but anyone who talks about “The Liberal Agenda” is probably someone who watches quite a lot of Fox News.

    But… if we were to look at gun control from an evidence-based POV,

    What measurable results do you want out of gun law?

    What other countries achieve those results? What are their laws? Has the US achieved similar results in the past? How?

    Is there a way that these laws can be trialled on a small scale?

    Firstly define your desired results, then experiment with how to achieve them… but at least define your desired results… because at the moment, you’re splitting the country with carefully crafted lies, like the idea that there is “A Liberal Agenda”.

    So for example: “We want US gun deaths below the average of other OECD countries” (rather than being worse than the 3rd world, which is what we have now)

    Or: “We want to reduce the power of the state to intrude into our lives – in a way that is clear, codified and transparent”

    Or: “We want to create a resiliant citizen-based militia”

    all of these are reasonable, rational goals that don’t split the country into liberals/conservatives. There is absolutely no reason on earth why these shouldn’t be achieved – but you’re not going to achieve them if you don’t define them.

    As it is, you’re not – your’e prattling on about “Liberal Agendas” and the rest of the world, quite rightly is looking on in a kind of shocked bemusement as the country that has ALL the advantages, rapidly stupids itself to death. For the record the “American Gun Control Debate” is one of the prime reasons the rest of the world has managed to get this idea that Americans are stupid. I promise you, you’re not getting this one right.

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