I see Scott Sumner has come out saying that we shouldn’t necessarily judge economic outcomes on whether they meet a “common sense” test, giving the example of an individual looking at social security. Bryan Caplan has criticised this, claiming the common sense is the foundation of all reason and stating that in the example Scott gives by stating the Scott is only making the argument by making the assumptions sound more plausible.
I’m not going to come down the middle in this, I’m going to disagree with both of them. The focus on an individual decision regarding something that effects only the individual (superannuation) misses the point of common sense beliefs – and isn’t the best way for Scott to make his claim regarding the difference between “truth” and “plausibility”. Remember, beliefs include our beliefs about others – and how this corresponds to (and can be valued as) aggregate action.
I’ve written about common sense and economics before. To quote wikipedia.
“Common sense is a basic ability to perceive, understand, and judge things which is shared by (“common to”) nearly all people, and can be reasonably expected of nearly all people without any need for debate”
As a result, common sense is a theory of belief formation – not just beliefs regarding your own actions, but beliefs regarding the actions of those around you.