Saturday, July 16, 2011

Facts, Beliefs ... and Budgets

Melissa Moore (@mooremm), Executive Director of INFORMS, recently tweeted the following question: "What or tools would you use if you were asked to help solve the US Federal /#debt impass?"  My initial reaction (after verifying that a flammenwerfer is not considered an OR tool) was that OR and analytics would be of no use in the budget debate (debacle?).  OR and analytics rely on facts and logic; it is unclear that either side of the debate is interested in facts or willing to be constrained by logic.

The question did set me to thinking about the difference between facts and beliefs.  I have a hard time sorting out when demagogues, whether politicians or media bloviators, are espousing positions they actually believe and when they are simply pandering for ratings/votes.  (My cynicism is hard won: I grew up in New York, went to school in New Jersey, and cast my first vote to reelect Richard M. Nixon.  It's been downhill from there.)  For the sake of argument, let's stipulate that both sides are acting on beliefs they truly hold.  When I was younger it seemed to me that, however venal either side's motives might be, both the left and the right were capable of negotiating based on some common understanding of governance and the political, social and economic realities of the country they governed.  It's hard to trade horses, though, when one side can't tell a horse from a zebra and the other can't tell a horse from a camel. Today, one party thinks that the answer to any question that does not contain the phrase "gay marriage" is "cut taxes".  The other side thinks that the answer to any question that does not contain the phrase "gay marriage" is "tax the rich".  That the proposed solution might not work is simply inconceivable (as is the possibility that the other side's solution might work).

The somewhat unnerving truth, however, is that everything we think we know as a fact (raw data aside) is ultimately a belief.  My training is in mathematics. Casual users of mathematics, and even forgetful mathematicians, tend to think that what has been "proved" (i.e., a theorem) is definitively true. In reality, theorems are merely statements that must follow logically from a set of axioms (beliefs). The system of logic we accept is itself a matter of belief, but in the interest of avoiding a painful flashback to an undergraduate formal logic course I'll drop that line of thought right now. As in mathematics, so too in the physical sciences: theory arises from a mix of assumptions and empirical evidence; when new evidences clashes with the theory, modifications are made; and when the modifications become untenable, some assumption is altered or deleted and the theory is rebuilt.  (Remember when the speed of light was a constant?)

So if mathematics and physical sciences are built on leaps of faith, we really cannot fault elected representatives (and economists) from doing the same.  What we perhaps can demand, though, is that these beliefs at least be acknowledged as beliefs (not "proven facts"), and that decision makers attempt to examine the likely impact of any of those beliefs turning out false. As a parallel (pun deliberate), consider Euclid's Elements, written ca. 300BC, in which Euclid developed many theorems of what we now refer to as "Euclidean" geometry based on five postulates.  The postulates appear self-evident, and mathematicians over the centuries tried unsuccessfully to derive one from the others (turning the derived one into a theorem). In the 19th century, Nikolai Lobachevsky famously replaced Euclid's fifth postulate with a negation of it, perhaps hoping to prove the fifth postulate from the others by contradiction. Rather than finding a contradiction, he invented hyperbolic geometry, which is not only consistent as a mathematical system but has actually found use (those bleeping physicists again).

So, back to the original question: can OR bring any useful tools to bear on the budget debate? With enough time and effort, and exploiting the systems perspective that underlies OR, perhaps we could diagram out the interplay of all the assumptions being made (consciously or unconsciously) by each side; and perhaps, using simulation models based on those assumptions and calibrated to historical data, we could explore the consequences of each side's preferred solution (or, for that matter, any compromise solution) should any specific assumption not hold up. It would be a massive undertaking, and I am not confident it would be productive in the end. Zealously held beliefs will not yield easily to "what if" analyses.


  1. Wouldn't it be a great idea to start with an alignment of tax policies along all states. Or is there any reasoned argument that not all US citizens are subjected to the same rules?

  2. I suppose "reasoned argument" is a matter of opinion. I'm not a political scientists, but I can think of two reasons that states go their own ways.

    The first is an artifact of the birth of the USA as a confederation of colonies (which became states). The colonies/states, being suspicious of central authority (after all, they were rebelling against a king) agreed to band together only if they retained significant levels of autonomy. The US constitution specifically allocates to the states any power not explicitly claimed for the federal government in the constitution.

    The second reason, which is more timeless, is that a significant number of people believe that "local" governments (states) better reflect the will of their citizens than the federal government does. I see some wisdom in this. It would be hard to standardize everything without having the most populous states dominate the least populous. On the other hand, there is also a bit of hypocrisy: some states claim on the one hand that they know better than the federal government but on the other hand usurp the powers of local cities and towns.

    The Internet is causing some rethinking of sales tax policies, though. It's hard to enforce state sales/use taxes. Collections will improve significantly if they can come up with a single Internet sales tax for the entire country, but it will be hard to do that without regularizing the ordinary sales taxes as well. (Taxing online purchases differently causes merchants to scream.)


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