It takes a shockingly long time for the masses of people to pick up on new realities. This is especially true if the new realities reverse very old trends that have burrowed certain false assumptions in our minds.
As examples, most people even today assume that you should:
Another thing that everyone knows: Prisons keep us safe from predators.
But what if all of these things are wrong, and not just a bit wrong, but wholly incorrect? What if in fact the reverse is true? What if, for example, hanging around in school for as long as possible is the worst life step you can possibly take? What if the real criminals are still in the streets, and most people behind bars are not really threats to anyone?
It would be helpful to have a one-volume book that takes on all these misnomers and presents the bracing reality in light of our changed times.
This is precisely what The Failure of Common Knowledge by Doug French does. It applies economics and contemporary facts to upend many common assumptions people make about critical life decisions. He shows that the common views do not take account of the real costs and risks — or the actual facts on the ground in our crazy, mixed-up world.
For many decades, for example, young couples have believed that buying a house was a great way to invest money and start accumulating capital. Problem: The housing crisis is not yet resolved. There is a good chance that the house will go down in value.
Not only that: In a market setting, a house should naturally depreciate over time. What we saw for decades was caused by government intervention. Plus, a house is a gigantic restriction on the range of choice people have about where to live. It can also be a money pit for endless accumulation and spending. It can actually ruin your life.
As a banker in the boom times, Doug saw firsthand how people’s wrong assumptions about how life should work left massive carnage and ruined lives. Today, millions struggle with underwater homes, underwater student loans, and underwater investment portfolios. They believed the propaganda being dished out by government and special interests, rather than thinking for themselves.
Consider how long the error lasted. Since probably the 1920s, housing ownership has enjoyed unjust praise. Every president made it a policy priority. I recall in the 1980s how Jack Kemp made house ownership a pillar of his political ideology. He often implied that it was the key to freedom itself. The suggestion was that somehow renters couldn’t really be good citizens.
The whole thing was nuts. And it created a gigantic bubble that grew and grew…until one day it exploded. The explosion threatened to take down the entire financial system. Even a year after the explosion, real estate developers were still in denial. They somehow it was just temporary. After all, how could so many have been so wrong for so long?
Well, young people have gotten the message. When they set out on their professional careers, they are avoiding mortgage debt. They are keeping the possessions low. They are renting not only residential space but also furniture. This way they stay free, independent, and flexible. It represents a dramatic change — and one far more in keeping with the market realities.
The other place for our money is supposed to be Wall Street. We’re told the stock market is efficient, reflecting the strength of the American Way and is a way for the average guy to participate in the bounty of capitalism’s production. In the long run, nothing can go wrong. The Federal Reserve can make any bust temporary with just the right interest rate and finely tuned amount of money creation. Keep stuffing money in that 401k and you can wake up at retirement age a millionaire.
The cruel reality: the opposite is true. Fed policy has turned the stock market into a crap shoot, leaving only the lucky to retire in comfort, while the rest toil at any sort of job they can find in old age until they drop.
The education bubble is not yet exploded but the time could be coming. The expense is enormous and disproportionate to the advantage. The opportunity costs of education are huge in a professional sense. For a century, the goal has been to keep kids at their desks, but this has not been a good thing. The best entrepreneurs of our time are drop outs who couldn’t stand the conformism of the academy.
Look for education to be the next pillar of conventional wisdom to come crashing down.
Then there’s the prison problem. Most of the people in the can never hurt anyone. And yet the U.S. has the world’s largest prison population — a reflection of the growing police state. More and more of us know someone who landed there for no good reason. Is this making us safer? No. And French shows why.
This book is a training guide for how to navigate a very confusing economic environment. Its lesson: Do not trust the common knowledge to run your life. The common knowledge has proven to be spectacularly wrong. Why let it manage your life?
You have to think for yourself to avoid the traps that special interests have set up at every turn. You have to subject “what everyone knows” to critical standards of rationality and economic logic.
Doug’s book is a primer for starting this process now. It is helpful for anyone of any age who seeks to avoid disastrous life decisions and get on the road to independent thinking, financial soundness, and a better life. You can get it right here or join the Club to get it for free.
Original article posted on Laissez-Faire Today
I'm executive editor of Laissez Faire Books and the proprietor of the Laissez Faire Club. I'm the author of two books in the field of economics and one on early music. My main professional work between 1985 and 2011 was with the MIses Institute but I've also worked with the Acton Institute and Mackinac Institute, as well as written thousands of published articles. My personal twitter account @jeffreyatucker FB is @jeffrey.albert.tucker Plain old email is email@example.com
Great points, but I wouldn’t place too much stock in the young renting homes and even furniture. This may have less too do with strategy, and more to do with poor credit from credit cards and the aforementioned student loans. They are in many ways a generation without roots.
The trouble actually isn’t the statements themselves (well not all of them) – they are generalisations, mostly true but sometimes not. The trouble is when people assume these statements are truisms and use them to replace actual thinking and investigation.
“Get as much formal education as possible” True except for the last 5 years and only false if you take out huge loans to get this education. There is no reason you can’t get more formal education these days while holding down a job as an electrician. Education doesn’t hurt and mostly helps in life. Huge loans to get it could be a bad investment though with little to no return, this is what the statement fails to mention.
“A house is a solid investment” True if you buy at a good price, not true if you pay too much. In this instance just because everyone else is paying something similar doesn’t mean you aren’t paying too much. Ie if everyone was jumping over a cliff would you?
“look to the stock market as an economic barometer” I don’t think was ever true and if it was then only by accident, I think this one is a shell game played by financiers to pull the wool over people’s eyes that price and value are the same thing and that what has happened in the past represents what will happen in the future. Red has turned up on the roulette wheel 15 times out of the last 20 so it is an indicator that red will occur more often.
“trust the Fed as the nation’s money manager” This is a contradiction. You can’t “manage” money, its a thing, it doesn’t perform any actions requiring management. You can either spend/lend it or save it. In the feds case they can create it out of thin air as well. By definition if you save it then it is doing nothing, no management required. If you spend or lend it then you have given it to someone else either in trade for some good or service or if you lend it it is presumably to some who can do something productive with that money and return it to you eventually with interest. In either case once you spend or lend it is no longer in your possession to “manage”. I believe this is why they have the saying “pushing on the end of a string”, the fed creates the money and lends it out, but they have no control over where it goes from there.
My opinion is that the primary reason young people these days don’t buy homes is that they simply can’t afford to. Housing prices in many areas are simply out of reach for young, single people. I don’t necessarily think that it’s because young people have become any wiser.
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