Random Thoughts on Stability vs. Truth

In the wake of the financial criss, there’s been a lot of discussion of price bubbles – do they exist? Can they be detected ahead of time? How would you define them? Sometimes this discussion is framed in terms of “fundamental value” vs. “speculation” or something like that. For example, maybe stock prices should be some function of the price/earnings ratio, or home prices should be contacted to rental prices, etc. The question is, how do we best uncover the true value of the asset? Hard core Chicago types would say, the (market) price is always right (hence the strong efficient markets hypothesis, see Quiggin 2010). More behavioralist or Keynesian economists would disagree, arguing that the market can deviate from the true value for extended periods of time, for a variety of institutional or psychological reasons. But I wonder if it might help for us to reframe the question in a way that is more relevant to people’s lived experiences. No homeowner cares about the potential price of their home today is the “true” value. They care whether or not tomorrow’s valuation, or the one five years from now, will be roughly similar to today’s. That is, we care about stability not truth.

Caring about stability over truth makes a lot of sense if you are an individual trying to live your life, rather than an economist making some argument about the epistemic power of markets. What you care about is whether or not you are likely to be able to sell your house five years from now if you have a child, lose your job, get transferred, etc. Schumpeter has a lot of thoughts about this, about how large organizations buffet individuals against the stability-reducing perennial gales of creative destruction, and I’d wager Harrison White does too (though I have not yet ventured far into the depths of Identity and Control).

There are a lot of echoes here of the science studies approach to facts and scientific controversies. A fact is basically defined as a stabilized statement, one that is enmeshed in a community of people and things that support and reproduce it, and which no longer needs to be checked against the circumstances under which it was established. Science studies doesn’t care so much about metaphysical truth as much as practical consensus. I think most people are at their core more like science studies scholars than philosophers* – we want to know which features of the world are relatively stable over a reasonable span of time, not whether something is “true”.

*And apologies if I’m presenting an entirely straw man’d version of philosophy! Call it “philosophy 101” not necessarily “philosophy as practiced by academics”.

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