Sunday, January 25, 2009

ur Premise is Wrong.

in-ur-ivory-towers

Here’s one of the thing’s I’m not sure how to reconcile in my head.  When someone is making a point, does an invalid premise at the beginning of the argument always invalidate everything else they have to say?

 

Example, for Christmas I was given this book.  In it, the fundamental premise of his argument--which is to show the rest of the world is growing at a break-neck pace and will outgrow America--is that oil demand has risen dramatically, hence the rest of the world is catching up.  How does he know that?  Well, prices of course!

Today, maybe 6-12 months after he wrote that, it’s been well shown that oil prices jumping 100% YOY was not, in fact, driven by demand.  At the time, when compared to international demand going up maybe 5% YOY, this should have been obvious on its face, but apparently not.  Only now are articles coming out that show speculation’s role in driving up oil prices over the last two years.  At one point last year, Vitol, a swiss company owned more than 11% of the contracts on the NYME.

In any case, I find it difficult to read the rest of the book when this premise is so flawed.

Here’s another example… the one that spawned this blog post in fact.  Andrew Sullivan linked to this article, which tells us there is no crisis!  We all make $2400 more than 2004, adjusted for inflation.

Except, what does “adjusted for inflation” mean?  Is he using the bogus government numbers, or estimates that haven’t been tinkered with?   Because I guarantee you, the 9-14% inflation rate we had between 2004 and 2008 certainly does not end up with people being better off.  Back of the envelope, using with my investments and token salary bump, I lost well over six digits over that time from inflation alone.

The final example is one everyone has an opinion on… how about Iraq?  Was it wrong to topple Saddam Hussein because the WMD intelligence was wrong?

History will tell in all of these cases, but I tend to believe that an argument founded on a faulty premise becomes entirely invalid.  Even if something in the midst of that argument makes sense, how can it be proven on a rocky foundation?

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