The main events in the history of science have involved new ideas overthrowing conventional wisdom. The notion that the earth was the center of the universe was upended by Copernicus. Species were thought to be permanent and fixed until Darwin. Physics was thought to be completely understood at the end of the nineteenth century and then came relativity theory and quantum mechanics to mess everything up. Godel overthrew the notion that mathematics was infallible. This story has been repeated so many times that people now seem to instinctively look for the counterintuitive answer to every problem. There are countless books on thinking outside of the box. However, I think that the supplanting of “linear” thinking with “nonlinear” thinking is not always a good idea and sometimes it can have dire consequences.
A salient example is the current idea that fiscal austerity will lead to greater economic growth. GDP is defined as the sum of consumption, investment, government spending and exports minus imports. If consumption or investment were to decline in an economic contraction, as in the Great Recession, then the simple linear idea would be that GDP and growth can be bolstered by increased government spending. This was the standard government response immediately after the financial crisis of 2008. However, starting in about 2010 when the recovery wasn’t deemed fast enough instead of considering the simple idea that the stimulus wasn’t big enough, the idea that policy makers, especially in Europe, adopted was that government spending was crowding out private spending so that a decrease in government spending would lead to a net increase in GDP and growth. This is very nonlinear thinking because it requires a decrease in GDP to induce an increase in GDP. Thus far this idea is not working and austerity has led to lower GDP growth in all countries that have tried it. This idea was reinforced by a famous, now infamous, paper by Reinhart and Rogoff, which claimed that when government debt reaches 90% of GDP, growth is severely curtailed. This result has been taken as undisputed truth by governments and the press even though there were many economists who questioned it. However, it turns out that the paper has major errors (including an Excel coding error). See here for a summary. This is case where the nonlinear idea (as well as conflating correlation with causation) is probably wrong and has inflicted immense hardship on a large number of people.
