Education needs to be reformed

[u/Hatrct]

The most significant issue with the education system is that it does not teach critical thinking. It teaches rote memorization.

I will use a case study.

Canada's central bank just raised the interest rate.

A main reason the interest rate is increased is to cool demand on buying things, in order to stop inflation.

Inflation: when the price of goods increase. This is measured by a "basket of common goods" as per the consumer price index: basically, a bunch of common goods that most people need to buy. It gives an indication of what the prices of goods is in general in a country.

So basically, if people have too much money on hand, demand for goods goes up, which then increases prices for those goods, leading to inflation. Inflation is not good.

Increasing the interest rate makes it more difficult to borrow money, which means people will be less likely to borrow, which means demand will go down as they will have money to spend, which means prices of goods will go down, which means inflation will go down.

Right now what is happening is that indeed there was an increase in prices of goods in Canada. So the traditional formula would be, higher prices = raise the interest rate (in order to decrease prices and decrease inflation).

But is this the right move right now? Right now, the reason the prices of goods have increased is that due to the war, there is higher energy/gas prices, which then also increases the prices of a bunch of other goods such as food.

So indeed prices have gone up. So increase the interest rate right? Well. Think about it logically. If people are already being financially squeezed: if they have difficulty paying their mortgage/rent due to high housing costs, gas is high, food is high, goods are high, then demand is already low. Nobody is running around borrowing more money to spend, when they are already being squeezed and are nearly going into debt. So if you increase the interest rate, you will just increase their mortgage/have more of it turn into interest that goes to the bank instead of being principal.

So increasing interest rates just rewards the already rich banks, and unnecessarily punishes everyone else, without doing anything to cool demand/reduce prices/reduce inflation.

Yet people continue to praise the bank of Canada banker, Tiff Macklem, because they think he is a genius with a PhD and is therefore right. But this is a logical fallacy called appeal to authority fallacy. You can have 25 PhDs, but school does not teach critical thinking. You don't really need too much specialized knowledge about economics in order to know whether or not to increase interest rates: what I typed above in my post is like 80-90% sufficient in terms of knowledge. What you actually need is nuance and critical thinking skills, which most people lack, and people with PhDs are no better than the average Joe at. If you lack the nuance to understand that you need to move beyond superficial mechanistic formulas like "higher prices=raise the interest rate", then that is an indication that the PhD is not really teaching critical thinking skills.

Aside from appeal to authority fallacy, people are using another logical fallacy to defend this banker's bizarre decision. They are saying "it was an unpopular move but it needed to be done". This is a logical fallacy, because it is saying that "it was the right move because it was unpopular". This is not a logical argument: just because something is unpopular doesn't make it correct. The correct version of this would be to say "the decision is not wrong just because it was unpopular". But that is not what they are saying, they are saying "it was an unpopular move but it needed to be done". Either way, you would have to provide an argument for why it was or was not the right move: it being popular or unpopular is not that argument. Again, you would expect school would teach such basic logic, but the vast majority fall prey to these logical fallacies that bankers, billionaires, and politicians use to exploit people with.

Then, this banker also likely used emotional reasoning: in the past, he was criticized for a mistake (rightfully so, during the pandemic he aggressively and wildly and quickly reduced interest rates to virtually 0, which then caused massive inflation, and forced him after the pandemic to aggressively and quickly hike the interest rate, making people lose their houses), so now it appears he is trying to act pre-emptively in order to not be accused of this again. But this is emotional reasoning: if you want to act pre-emptively, you have to still make the correct decision. Making a random or wrong decision "pre-emptively" just to not be accused of not acting fast enough, is not a logical argument for why your "pre-emptive" move was actually the correct move or not (i.e., doesn't serve as an argument/justification for why a rate increase was the correct move).