Pandering to mob threatens economy

The United States Navy has rescinded Bill Cosby’s honorary rank of Master Chief Petty Officer of the Navy.

This was a regrettable decision. Throughout its history the Navy has defended the Constitution and the American way of life against all comers, and in so doing brought honor and distinction to itself. Its premature action against Mr. Cosby brings neither.

Mr. Cosby may be guilty or not. At this point we do not know. There are now many accusers and his denial of the charges doesn’t seem to carry much weight in public opinion. Many of the charges relate to events in the distant past, though, and it will be difficult to determine the facts.

The presumption of innocence, while not specifically stated in our Constitution, is implied in the legal protections and procedures spelled out in the Bill of Rights amendments and in subsequent legal precedents. Innocent until proven guilty is important to us, or at least it used to be.

This might not seem to be an economics issue but it is. At the microeconomics level Mr. Cosby, for example, is a public entertainer; his reputation is his livelihood. His guilt or innocence in the face of these charges should be a matter of significant economic consequences for him and, to a lesser degree, for businesses that might partner with him.

Most of us aren’t entertainers but we find ourselves in the same boat. Our reputations are our livelihood. And today’s information environment makes it almost impossible to escape the stains that charges and accusations leave on our records or their effect on our job prospects.

It is understandable why business partners would quickly sever ties with Mr. Cosby after the allegations of sexual assaults began to surface. Company management almost never sees an upside to controversy and only rarely perceives any benefit to acting on principle in controversial situations.

The responses by non-business institutions to these kinds of situations, though, have been disappointing. In 2006, three members of the Duke University men’s lacrosse team were accused of raping a black woman who had been paid to dance at a team party. Formal charges were filed, the news media went into high gear and the university president went into high dudgeon. The lacrosse season was cancelled, the coach was fired, and all sorts of hateful things about the young men were said.

The woman’s charges were eventually found to be false, the prosecutor was disbarred, and the three young men were declared innocent. The university leaders, however, never apologized for their premature words or actions.

In the end, then, the university learned nothing, and its behavior is now apparently becoming the model for academic response. At the University of Virginia a porous report of a rape at a fraternity party was quickly seized upon as an opportunity to lead the torch-carrying villagers. The university president ordered the immediate shutdown of all fraternities and sororities and began campus discussions of the “rape culture” there.

Although the report, which had been published in Rolling Stone, now seems to be shaky, the UVA story is still unfolding. The initial response, however, was not promising.

Where’s the economics in all this? If our institutions routinely seek approval and pander to emotion-driven demonstrations by abandoning our values, our economy is in serious jeopardy.

Institutions, and individuals, seem to be responding to a model of reality rather than the reality of the situation itself. That is how an accusation that fits the model becomes more real than the truth that might be revealed later. The more common this response becomes, the more we, and the economy, become slaves to accusations, rumors, gossip, and the worst dimensions of the Internet and social media.

When the underlying model is faulty the response is usually faulty, also. Some of those demanding a $15 dollar minimum wage, for example, are relying on a faulty model of our economy: “We can change the rules” that control business and the system.

There is an element of truth in the slogan. We can change the rules. But we cannot change the underlying forces which drive economics and business. We can change the rules governing airlines, for example, but we cannot fly from here to Chicago on a bowling ball no matter how many rules we change.

Our time-tested values are crucial to individuals and to our institutions. They provide the bond between model and reality that is necessary for survival in today’s world and we need to treat them with respect.

James McCusker is a Bothell economist, educator and consultant. He also writes a column for the monthly Herald Business Journal.

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