This is the second post in an ongoing series exploring problems with the ways we think about politics. Read the first post on what rom-coms can teach us about politics here.
Four years ago, I woke up, checked the comments on my Stanford Daily column, and discovered a rambling manifesto denying Catholic Polish persecution of Jewish Poles during the Shoah.
Poland before, during, and after Nazi occupation is a heartbreaking and complicated story. I mostly won’t examine it in this post. Some Catholic Poles murdered their Jewish neighbors without any compulsion from occupying Germans. Others saved Jews at great personal risk.
I’m more interested in how the commenter tried to contest history — something they had done at least 488 other times in posts on related stories. Their main strategy was to spit out dozens of false numbers and anecdotes to construct a mirage of expertise so that a reader would feel out of their depth.
Bankers deploy a similar strategy to fight regulations. They hide behind their expertise, which is genuine to some extent. Even people who are skeptical of bankers can struggle to call them out. Because more than ever, we live in an age where expertise is the mechanism by which we identify truth.
Expertise
No one is an expert on everything. And in the Internet age, you can find a lot of information on anything. People who fall for misinformation mistakenly trust their ability to reason through claims in subject areas they know little about. Savvy web searchers evaluate reputation. They look for clues about the expertise and credibility of the person or organization who’s behind the information.
Read More: If you want to read more on reputation, this 2018 Fast Company article by the Italian philosopher Gloria Origgi is a good start.
Two things to keep in mind about reputation:
First, it’s easy to fake expertise at the surface level — like the commenter did by providing so many supposed statistics and other facts. That’s why it’s a bad idea to try to evaluate reputation on our own. “Do they feel like an expert?” is a question we should toss out of our vocabulary.
Second, even people with legitimate claims to expertise can disagree. No, not about stuff like the existence of climate change or vaccine efficacy. But about plenty of other big issues — yes. And that means “take our word for it, we’re the experts” shouldn’t automatically make us nod our heads.
Bankers
Big banks don’t like to be regulated. They warn that new regulations will hurt economic growth and raise the possibility of “unintended consequences.”
Read More: The information in this section comes from an excellent 2013 book, The Bankers’ New Clothes: What’s Wrong with Banking and What to Do About It by Anat Admati, an economist at Stanford who separately taught me and my dad, and Martin Hellwig, an economist at the Max Planck Institute.
In 2009, then CEO of Deutsche Bank Josef Ackermann claimed that regulations “would restrict [banks’] ability to provide loans to the rest of the economy.” A bank lobbyist said that “a dollar in capital is one less dollar working in the economy.”
Except that isn’t true at all. Higher capital requirements don’t require a bank to refrain from lending out money. They simply require that more of the money that banks lend out come from owners, shareholders, or retained profits — rather than through debt.
Policy Break for Wonks: Debt lending, often referred to as borrowed money, is money that someone else lent the bank, which then lends it to individuals and businesses. The bank has to pay money back to that someone else, just like you pay back the bank. If too many people don’t pay back the bank, then the bank can’t pay back its lender. The resulting cascade can threaten the financial system.
By contrast, equity, or unborrowed money, is money the bank retains from profits or raises from shareholders or owners. Banks don’t have to pay back unborrowed money at any particular schedule. So if people don’t pay back the bank, the losses don’t cascade the same way that failure to pay back borrowed money does.
Overall, the more of a bank’s assets are financed via unborrowed money, the more stable the bank is. Higher capital requirements make banks finance more assets with unborrowed money. After the 2008 global financial crisis, many people pushed to raise capital requirements. Banks pushed back.
Admati and Hellwig note in their book that “Mr. Ackerman… said nothing, however, about how continued financial instability and turmoil would affect growth.” In other words, Ackerman and others focused exclusively on the potential consequences of action, without accurately weighing the existing consequences of inaction. (Sound familiar? Read “What rom-coms teach us about politics” if it doesn’t…)
One rhetorical reason bankers’ arguments are effective is their self-depiction as experts. That expertise makes unlikely or false consequences feel probable. After all, most of us know relatively little about finance. How would we even begin to disagree?
But again, experts themselves disagree. And plenty of other experts, Admati and Hellwig among them, provide us with the intellectual tools to see through the bankers’ new clothes. Clear communication rooted in expert opinion helps us dismiss false potential consequences and articulate the costs of doing nothing.
The Bottom Line
The commenter on my column feigned expertise, hoping that a slew of numbers would make a reader trust the information itself.
Bankers, who are experts, deploy their credibility and a wall of jargon to make non-bankers feel unqualified to dispute assessments of the consequences of regulation.
In both cases, however, the story is only compelling in isolation. When we look outside of a single source and see what experts we trust have to say, previously smooth argumentation splinters into jagged exaggerations and falsehoods.
Personal Politics seeks to be one of those sources that contextualizes issues via personal stories, analysis, and more. Our highest aspiration is to provide a conceptual and personal vocabulary that people can use to think and talk about politics.