Revisionism is Underrated
Using a New Year to Reexamine Deeply Held Convictions
I like to imagine that I am open-minded, intellectually humble, and embrace uncertainty. Surely I hold my views weakly and change them as facts change.
Hah! I am not Keynes. Nor was he. His famous quote was probably created by Paul Samuelson, aka Larry Summer’s uncle. At best, I try to read writers whose beliefs differ from mine and seek data that challenges my priors. I might ask ChatGPT (and less often friends) to privately critique my views. But like most of us, I often take comfort in familiar beliefs and avoid the cognitive dissonance caused by inconvenient facts.
So rather than use the coming of a New Year to make resolutions, let’s use it to inventory beliefs that have not held up well during the past twelve months. A year ago, I would have asserted with 80%+ confidence that:
The falling cost of renewable energy will let us burn far less fossil fuel.
Israeli Prime Minister Benjamin Netanyahu is weakening Israel by dividing its people and emboldening its enemies.
European social democracy does an admirable job of constructing markets that deliver more equitable social outcomes.
Although each of these assertions may yet turn out to be true, my confidence in them has dropped below 50%.
Renewable energy is exploding, but we are not yet burning fewer fossil fuels. In 1865 English economist William Stanley Jevons observed that steam engines had become more efficient. Since each engine used less coal, he expected coal consumption to drop. But lower energy costs increased the demand for power, so even though each individual engine used less coal, total coal consumption rose. Today, Jevon’s Paradox asserts that technological improvements alone may not reduce resource use. It highlights the need for comprehensive strategies that include market regulations like carbon pricing alongside efficiency improvements. It explains why, despite radically cheaper power sources, global fossil fuel consumption remains at record levels.
Netanyahu has effectively punished Israel’s enemies. The Israeli response to the October 7, 2023 attack has destroyed Gaza and killed some 45,000 Palestinians. The International Criminal Court (ICC) issued an arrest warrant for Netanyahu for alleged war crimes – but most Israelis view the ICC as anti-Israeli, so this hasn’t weakened his political standing.
Moreover, Netanyahu has not only severely degraded Hamas, he decapitated Hezbollah in Lebanon and helped topple the hated Assad regime in Syria. He has severely weakened Iran and the Houthis in Yemen. Netanyahu’s popularity is rising because he's led a historic comeback since October 7, despite his culpability for the security and policy failures that the attacks exposed. I continue to believe that he is a terrible leader, but he is much more popular than he was a year ago. Can he win reelection? I once doubted it and would still bet against it – but Israelis call him The Magician for a reason.
European social democracy is on the ropes. As recently as 2015, the US and the EU ran economies of the same size; today, the US is nominally 50% bigger. In the last 50 years, Europe has not started a single company worth more than $100 billion. The US has started 21 of them, and six of these companies are worth more than a trillion dollars today.
Why? It’s a spiral. Fundamentally, European labor productivity is stuck. This, along with structural, fiscal, and geopolitical factors, has led to a big drop in research spending. Many EU graduates now see the U.S. as more attractive because pay is higher and demand for technology and engineering talent is higher. All of this reduces labor productivity growth, which drives economic growth and higher living standards.
In September, the EU released an analysis of its failings that document these issues. At the same time, social democratic parties have lost ground in most EU countries, the left has fragmented, and right-wing populist movements have gained political ground. Very few Europeans today argue that traditional postwar social democracy represents a promising future.
Revisionism is underrated. It would not be difficult to add ten more beliefs undermined by recent events. I would have bet against Javier Milei turning around Argentina, Trump supporting skilled immigration, and the persistent influence of unrepresentative groups in the Democratic Party. I would still bet against all of these things – but with much less confidence than I had a year ago. But one of my 2025 resolutions is to make Modern Times posts shorter, so I'll stop here.
Which of your beliefs have recent events caused you to question? What evidence will you use to update your views in 2025?
Happy New Year.