Wednesday, June 15, 2011

The Power of Presuppositions

We probably all know this – that presuppositions often prevent clarity of thought and action. Yet when I encounter these presuppositions I am often surprised anew – even by the same cases over and over again. Here are some examples.
1. Consider this simple riddle: “Brothers and sisters have I none; this man’s father is my father’s son”. Who is “this man”?
Most people, upon hearing this, quickly assume that the answer is “I” – that I am this man. My late father-in-law could not be budged from this. Pushing him, I discovered that he began by assuming that the quote is from someone looking in the mirror – which means, if you are saying the quote, you are looking at yourself. I tried to point out that in this case the quote is contradictory or nonsense – it implies that you are your own father and son. I could never convince him.
But the solution is beyond simple, it is trivial. Let’s use the kind of math everyone can follow:
This man = X
This man’s father, X’s father = Y
Re-forming the quote: “X has no brothers and sisters; Y is X’s father. Y is my father’s son”.
So I am Y, X’s father and X is my son.
Answer: X, this man, is my son.
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2. More significant: I frequently put the following multiple choice question on my economics exams, even at a fairly advanced level.
"What is the effect of imposing a minimum wage in an economy at a level below the already existing (uniform) market wage”?
a. The average wage will rise
b. The average wage will fall
c. The average wage will be unaffected
d. It is impossible to tell.
This is a question anyone, including anyone with absolutely no economics training whatsoever, should be able to answer correctly. But presuppositions get in the way.
Most people go immediately to option b. “The average wage will fall”. In a class of 21 bright high school seniors that I just taught this semester, everyone picked this option, in spite of repeated explanation of this very case in class over the preceding weeks. The mental barrier is formidable.
Here is what is going on: people’s intuition is to assume that laws imposed by government are more important than the spontaneous, hidden workings of the market place – aka, the private decisions of buyers competing with buyers and sellers competing with sellers. When people hear that in the question the government imposes a minimum wage lower than the wage currently paid, their minds immediately translate this as “permission” to pay a lower wage and they see no constraints against doing so. Its almost as if employers of labor operate in a vacuum and this new minimum wage law now allows them to pay less than they were paying – because, we all know after all, that they pay a little as they can.
Of course, the correct answer, again trivially, is option c. “The average wage will be unaffected”. It is a “minimum” wage law; not a “maximum” wage law. It does not prevent employers from paying more than the minimum, which, by assumption, they are already doing. Yet most people cannot see it. [Notice how the simple meaning of the words is missed.]
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3. More topical: “Tax-breaks” for the oil companies.
The politicians are much exercised about (see a political opportunity in) the question of repealing tax-breaks currently in place for the oil companies.
This resonates with much of the public, because they hate having to pay such high prices for gasoline – it really bites. The most common initial reaction is to welcome the initiative to repeal the tax-breaks.
As I understand it, two things are going on here – punish the oil companies and bring down prices. People are angry with the oil companies. They see prices going up and oil company profits going up. So they think if the tax-breaks are removed that will hurt oil company profits. They are right about that. They also seem to think that it will cause oil and gas prices to fall. They are completely wrong about that – I can’t even see how they get there. But when I point out that removing the tax-breaks will force prices even higher I am mostly met by blank stares. Some sort of presumption is getting in the way.
Let’s be clear about one thing, removing a tax-break is just another way of imposing a tax. Imposing a tax clearly leads to higher prices paid by the buyer (and lower prices received by the seller). Money is taken out of production by the government. The amount supplied at any price goes down, so prices will rise for any given amount demanded. Not rocket science.
It is also relevant to point out, as I always do, mostly to no avail, that companies do not pay taxes in any meaningful sense. A tax imposed on a company is actually “paid” by the customers, workers, suppliers and others connected with the company. The ones who probably pay the least are the fat-cat executives whom the politicians love to scapegoat and the public loves to punish. It’s all a grand and harmful illusion signifying destruction of value.
It probably all boils down to the power of language to shape thought. Wittgenstein would be proud.

3 comments:

Robertson said...

Great Blog. I was searching for information to help me better understand the term presuppositions. I do not have much experience in this area.. I stumbled upon your site on accident and found it interesting so I continued to read even though it only did a little to help me with presuppositions.

You never know what treasure you'll uncover next on the internet.

~ Robertson

Michael vB said...

But surely you would agree that the market would operate more efficiently if everything were priced appropriately? And surely these and many other subsidies do little else but distort the market?

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