The science bezzle

Palko quotes Galbraith from the classic The Great Crash 1929:

Alone among the various forms of larceny [embezzlement] has a time parameter. Weeks, months or years may elapse between the commission of the crime and its discovery. (This is a period, incidentally, when the embezzler has his gain and the man who has been embezzled, oddly enough, feels no loss. There is a net increase in psychic wealth.) At any given time there exists an inventory of undiscovered embezzlement in—or more precisely not in—the country’s business and banks.

. . .

This inventory—it should perhaps be called the bezzle—amounts at any moment to many millions of dollars. It also varies in size with the business cycle. In good times, people are relaxed, trusting, and money is plentiful. But even though money is plentiful, there are always many people who need more. Under these circumstances, the rate of embezzlement grows, the rate of discovery falls off, and the bezzle increases rapidly. In depression, all this is reversed. Money is watched with a narrow, suspicious eye. The man who handles it is assumed to be dishonest until he proves himself otherwise. Audits are penetrating and meticulous. Commercial morality is enormously improved. The bezzle shrinks.

He also quotes John Kay:

From this perspective, the critic who exposes a fake Rembrandt does the world no favor: The owner of the picture suffers a loss, as perhaps do potential viewers, and the owners of genuine Rembrandts gain little. The finance sector did not look kindly on those who pointed out that the New Economy bubble of the late 1990s, or the credit expansion that preceded the 2008 global financial crisis, had created a large febezzle.

Palko continues:

In 2021, the bezzle grew to unimaginable proportions. Imagine a well-to-do family sitting down to calculate their net worth last December. Their house is worth three times what they paid for it. The portfolio’s doing great, particularly those innovation and disruption stocks they heard about on CNBC. And that investment they made in crypto just for fun has turned into some real money.

Now think about this in terms of stimulus. Crypto alone has pumped trillions of dollars of imaginary money into the economy. Analogously, ending the bezzle functions like a massive contractionary tax. . . .

And this reminds me of . . .

Very parochially, this makes me all think of the replication crisis in psychology, medicine, and elsewhere in the human sciences. As Simine Vazire and I have discussed, a large “bezzle” in these fields accumulated over several decades and then was deflated in the past decade or so.

As with financial bezzles, during this waking-up period there was a lot of anger from academic and media thought leaders—three examples are here, here and here. It seems they were reacting to the loss in value: “From this perspective, the critic who exposes a fake Rembrandt does the world no favor: The owner of the picture suffers a loss, as perhaps do potential viewers, and the owners of genuine Rembrandts gain little.”

This also relates to something else I’ve noticed, which is that many of these science leaders are stunningly unbothered by bad science. Consider some notorious “fake Rembrandts” of 2010 vintage such as the misreported monkey experiments, the noise-mining ESP experiments, the beauty-and-sex ratio paper, the pizzagate food studies, the missing shredder, etc etc. You’d think that institutions such as NPR, Gladwell, Freakonomics, Nudge, and the Association for Psychological Science would be angry at the fakers and incompetents who’d put junk science into the mix, but, to the extent they show emotion on this at all, it tends to be anger at the Javerts who point out the problem.

At some level, I understand. As I put it a few years ago, these people own stock in a failing enterprise, so no wonder they wants to talk it up. Still, they’re the ones who got conned, so I’d think they might want to divert some of their anger to the incompetents and fraudsters who published and promoted the science bezzle—all this unreplicable research.