How do we know something is true?

Like Richard Rorty, I’m skeptical of any grand theory of epistemology. We believe things when we find the arguments/evidence persuasive. There’s not much more that can be said.

Let’s take an example from yesterday’s media:

One expert is calling for a second round of stimulus checks to offset the financial strife experienced by struggling American during the coronavirus pandemic.

Forget about the stimulus checks, I’m interested in the question of whether Americans are “struggling”. Is that true?

(Yes, I know that I’m a really bad person for even asking that question. Tens of millions are unemployed and there’s rioting in the streets. But I’m 64 years old, so what do I care what people think of me?)

So let’s think about how we’d know if Americans are struggling:

1. In a country of 330 million people there will always be many people who are struggling. But I’m interested in whether they are struggling more than usual.

2. You’d think that Americans would be struggling much more than usual (say much more than in 2019) given the 15% to 20% unemployment rate expected to be reported on Friday, as well as the huge drop in output. After all, the circular flow diagram teaches us that aggregate output equals aggregate income.

3. But there are some puzzles. April saw by far the largest increase in personal income ever seen in America. That’s not normal for a month that is likely to end up being the absolute trough of the 2020 depression. And saying it’s “not normal” during a depression is an epic understatement.

So how are we supposed to determine if Americans are struggling? I can look at the income data, but I don’t see it. Or I can consider the people that I know personally. A few are struggling, but no more than usual. Most are not struggling. Or I can rely on the news media. But would you expect ABC/NBC/CBS/CNN news to do a report claiming, “we’ve determined that contrary to widespread impression, Americans are not struggling.” Even if they privately believed it to be true?

It turns out that it is really hard to figure out whether Americans are struggling; at least right now it’s difficult.

In the end, I suspect that Americans really are struggling more than usual, as the aggregate income data hides a big increase in variance. Lots of small businesses are seeing big losses. And even unemployed workers that are fully compensated with the expanded unemployment compensation program face psychological stress, uncertainty about what the future holds.

If you think Rorty and I are wrong about knowledge, and that there’s an objective, scientific way to figure out whether Americans are suffering, then won’t you end up using the official personal income data? Isn’t that the most objective data that we have? And if so, doesn’t that mean Americans are seeing a wonderful surge in income beyond our wildest dreams?

Or, is the world so complicated that no one method is best, and we need to consider all sorts of evidence, some quite intangible and hard to put into words? Knowledge is what we believe to be true.

I believe that people are struggling.


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29 Responses to “How do we know something is true?”

  1. Gravatar of Chase Chase
    2. June 2020 at 11:05

    Why choose to use income? I believe you would argue consumption is a better measure of well being than wages. Or at least I recall you making that argument about income inequality. So wouldn’t the drastic drop in personal expenditures be the better measure in this case too?

  2. Gravatar of PC PC
    2. June 2020 at 11:08

    A histogram of per capita personal income would be a better start than a single aggregate.

  3. Gravatar of rayward rayward
    2. June 2020 at 11:31

    Of course, we are rapidly approaching the cliff, which helps explain why Trump was hell-bent on re-opening the economy. What cliff? The cliff that is at the end of the unemployment compensation supplement and at the end of the 60-day period for employer’s to qualify for PPP loan forgiveness by keeping employees on the payroll for the 60-day period. Add to that, mayhem in the streets. Widespread suffering has caused many Christians to lose their faith, but many of today’s evangelical Christians find reassurance in the suffering of secularists, reassurance that the End Time is near. And maybe it is. After Saturday night’s mayhem in Charleston, the business owners along King boarded up their store and restaurant fronts. My nephew, whose office is on King, says that it looks like people are preparing for a hurricane. Maybe they are.

  4. Gravatar of Benjamin Cole Benjamin Cole
    2. June 2020 at 12:42

    Imagine trying to determine the “truth” in China.

  5. Gravatar of dtoh dtoh
    2. June 2020 at 13:56

    Scott,
    Accurately define “struggling….. then we can easily answer the question.

  6. Gravatar of P Burgos P Burgos
    2. June 2020 at 16:22

    @ B Cole

    The leadership of the CCP has trouble with this. The SCMP had an article last year about how China’s population was overstated in many countries estimates by a hundred million people, and is actually closer to 1.28 billion than 1.38 billion people. The reason for the bad data being that for a decade or more, provinces had inflated their tally of the number of students, in order to qualify for more money for education. Which also means that China has an older population than is officially reported, and that there are fewer women of childbearing age in China than reported.

  7. Gravatar of ssumner ssumner
    2. June 2020 at 16:38

    Chase, I certainly don’t think that’s what most people mean by struggling, otherwise I’d be included in those who are struggling.

    PC, That sounds right.

    dtoh, I don’t think the term has a precise definition, indeed very few economic terms do. (Consumption, investment, capital, output, money, monopoly, inflation, etc., are all vague concepts.) But even if we picked an arbitrary definition it would be difficult to know how precisely our data matched reality.

    That is, I don’t think we have any objective data on the extent to which “Americans are suffering” based on ANY plausible definition.

    It would be interesting, however, to see a survey of self-reported economic well being, which is conducted frequently. Is there one? I wonder how that correlates with personal income most of the time, and then in April 2020. I think self-reported well being is as good a measure as any.

  8. Gravatar of Sergy Sergy
    2. June 2020 at 17:14

    Personal income will skyrocket up to 10s of millions if all but billionaires lose their jobs. Most of job losses are in lower income category. So I think that pretty much explains up spike in personal income.

  9. Gravatar of dtoh dtoh
    2. June 2020 at 18:37

    Scott,
    I think part of the problem is that a lot of the media and many pundits are not interested in the data. They make money, get fame etc. by reporting on anomalies.

    Also I think it’s relative. Having spent a lot of time in places where per capita GDP is only 4% (that’s 4% not 40%) of the U.S. level, it’s a little weird to hear people suggest that Americans are struggling economically.

  10. Gravatar of Thomas Hutcheson Thomas Hutcheson
    2. June 2020 at 20:27

    TIPS inflation expectations are still below the Fed’s supposed target, so bond traders at least expect that Feb policy will lead to struggling over the next ten years.

  11. Gravatar of Michael Sandifer Michael Sandifer
    2. June 2020 at 21:55

    I think it’s better to err on doing too much rather than two little in crises like this. That said, we should think about more efficient ways to get money to people and small businesses quickly in future crises.

    Mark Cuban had the idea of allowing people and small businesses to overdraft their bank accounts, and then have the government reimburse the banks. Perhaps overdrafts could be allowed in proportion to the average withdrawals over the pre-crisis 12 month period.

  12. Gravatar of Chase Chase
    2. June 2020 at 23:14

    Scott, that’s my point. I still have my high paying job and I’m spending less so I have more disposable income with less ways to dispose of it in the manner I prefer. So technically I could be said to be struggling relative to my prior circumstance. Of course, that’s not what you mean by struggling. It’s only to say you can’t point to these high level metrics for society anymore than one person. Burglaries are up, suicides and violent crime are down. Death by Coronavirus is up and death by heart disease and car accidents are down. Unemployment is way up but there’s a moratorium on foreclosure and evictions. Gas prices are down but there’s nowhere to drive. In the absence of good measurement I would propose it’s best to be overly generous in the short term.

  13. Gravatar of Benjamin Cole Benjamin Cole
    2. June 2020 at 23:40

    P Burgos—

    Figuring out what might be true in Western nations is task for the diligent, and even then mixed results are obtained.

    In China? A fool’s errand.

  14. Gravatar of Accounting for stimulus checks | askblog Accounting for stimulus checks | askblog
    3. June 2020 at 03:23

    […] Scott Sumner writes, […]

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    […] Scott Sumner writes, […]

  16. Gravatar of ssumner ssumner
    3. June 2020 at 08:10

    dtoh, You said:

    “Having spent a lot of time in places where per capita GDP is only 4% (that’s 4% not 40%) of the U.S. level, it’s a little weird to hear people suggest that Americans are struggling economically.”

    Completely agree. It’s all relative.

    Chase, You said:

    “Of course, that’s not what you mean by struggling.”

    And more to the point it’s not what the media means by struggling. I was responding to the media report.

  17. Gravatar of Christian List Christian List
    3. June 2020 at 08:34

    When I listen to my left-wing liberal friends these days, then the “protesters” and “anti-fascists” who plunder and pillage in American cities are struggling as well.

    Seen in this light, Hitler also struggled quite struggingly, he even named his book after it.

    There are little struggling strugglers everywhere. It is the excuse in modern times in order to act like a maniac. “Sorry, but I’m struggling.”

  18. Gravatar of ML Pickel ML Pickel
    3. June 2020 at 08:41

    rayward hits it: Hospitality & leisure comprise a large proportion of the newly unemployed, and they are currently earning more on unemployment insurance than their prior wages. That federal benefit ends in July, which is when the delayed economic “struggle” will begin. Millions will not be recalled from temporary furlough status as businesses rebuild more efficiently; they will transition to long-term layoff and struggle mightily.

  19. Gravatar of ssumner ssumner
    3. June 2020 at 09:36

    Christian, I’m struggling to understand your point.

  20. Gravatar of Christian List Christian List
    3. June 2020 at 11:17

    Scott, my point, if you want to have one, was that struggling is subjective.

    If you want to look at pure data, you should be looking at individuals. Aggregate personal income is a nice gimmick, but it just shows that the government is handing out a lot of money to everyone one-time, right now, with a watering can.

    I must admit, the graph is impressive, not too many people would have thought that. I guess that was your point then.

    I could imagine that the people who have lost their jobs still feel as if they are struggling right now even if they get unemployment benefits.

  21. Gravatar of Tom Grey Tom Grey
    3. June 2020 at 15:20

    People struggle to breathe, to live, if they’re having trouble breathing, or living — or if they’re very sick. Fewer people are in hospitals in May 2020, than Many 2019.
    People struggle to eat, if they’re hungry. I don’t think May hunger was worse than last year.
    People struggle to “figure out what I’m going to wear”, tho less so if they’re not going to work, so it’s OK if the boss is already there. I wouldn’t call that real struggling.
    People struggle to pay rent, or their mortgage. (I owe, I owe, so off to work I go…) Making rent is the working poor normal struggle, mortgage payments are the middle class normal struggle. No problems for May & June.

    When the budget for the future looks like there’s not enough money, in the future, one can feel pressure about expecting too little money, in the future. How much “struggling today” can be attributed to expectations of the future?

    People are always struggling – there’s less present-day struggle for June than usual, but more anxiety about expected future struggling.

  22. Gravatar of How Do We Know Something Is True? – Finanz.dk How Do We Know Something Is True? – Finanz.dk
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  23. Gravatar of MikeDC MikeDC
    4. June 2020 at 05:22

    Rather, it’s dumb, and it always has been dumb, to treat an aggregate whole as if it is the sum of its parts. It’s just the fallacy of aggregation.

    It’s always been true, but this has been a year of Spectacularly Bad Science because we generally refuse to acknowledge this. When you ask whether this can be scientifically, objectively addressed, you’re missing the point, even when you say it can’t.

    You’re saying the data doesn’t exist to determine if “Americans are suffering”. But “Americans” in the way you use it here is a utilitarian abstraction. Whether, on average, “Americans are suffering” is a scientifically useless concept that says next to nothing about which Americans are suffering and which are not.

  24. Gravatar of Justin Justin
    4. June 2020 at 06:28

    I think it is possible to check and see if any particular subset of Americans are struggling financially due to COVID. There probably are a few types.

    Say you had someone who was already looking for a job in the hospitality and leisure sector when everything was shutdown. This person would clearly be struggling financially and the stimulus check wouldn’t have helped that much.

    Consider also a business owner who made $150,000 last year and now can’t operate, and didn’t successfully get a PPP loan. He received no stimulus check because his earnings in a non-pandemic year were too high.

    People like this are struggling, and we can objectively figure that out if we had the resources to figure out their individual situations.

    The tough part is, people who fall through the cracks are unlikely to be helped much by a $1,200 stimulus. Getting two $1,200 checks for a 3-4 month period, if you have no other income, may not be enough to pay your bills. Another stimulus check with income thresholds isn’t going to help the business owner at all.

    So even if these people exist (and they probably do), sending stimulus checks to the entire country is an expensive way of barely helping them, if at all.

  25. Gravatar of Justin Justin
    4. June 2020 at 06:33

    –“Also I think it’s relative. Having spent a lot of time in places where per capita GDP is only 4% (that’s 4% not 40%) of the U.S. level, it’s a little weird to hear people suggest that Americans are struggling economically.”–

    Yeah but cost of living matters. Unless someone lets you crash at their home for free, it is extremely difficult to live on $200/month in America without being homeless.

    Being unable to afford bills for a relatively modest standard of living (roof over your head, utilities, clothes, groceries, basic transport and health care) can reasonably be described as struggling.

  26. Gravatar of Aleksandar Aleksandar
    4. June 2020 at 12:41

    Scott,
    Are you having time to read Schopenhauer as you said you would do in retirement?

  27. Gravatar of ssumner ssumner
    4. June 2020 at 14:52

    MikeDC, Would you suggest that reporters not claim that people are struggling?

    Justin, But even in PPP terms dtoh’s basically right; there are huge differences in living standards, and in expectations of what you “need” to live on.

    Aleksandar, I haven’t retired yet, but still hope to read him.

  28. Gravatar of Dtoh Dtoh
    5. June 2020 at 04:40

    @justin
    I understand your point but I think it also has a lot to do with expectations surrounding consumption. In a lot of poor countries you have shared resources and to give you just one example, in poor countries people often share not only a small apartment but they share beds with unrelated individuals. If you’re willing to accept the same patterns of consumption, it’s pretty easy to live on $200 a month in the US.

  29. Gravatar of MikeDC MikeDC
    5. June 2020 at 07:33

    Scott, I suggest that reporters report information rather than “claim” things.

    Further, I suggest they report this information in a numerate context. The old “who, what, when, where, why, and how” would be a good start.

    Thus, “Americans are struggling” might become “X% of Americans are struggling to…”. Replace emotional, intractable claims with discrete and factual information.

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