The Nirvana Fallacy: The Best is the Enemy of Good Thinking

I was struck last weekend by the frequency of coincidence. I was working on the curriculum for my course in Risk Analysis – trying as always to stay a jump ahead of a class of smart, inquisitive MBA students.

This time it was the recurring observation of a common defect in logic and reasoning, named the “Nirvana Fallacy”: the lapse into error of comparing a defective or sub-optimal situation against an idealized or perfect state – failing to recognize that the assumed achievement of perfection is impossible in a world of flaws, limits and constraints.

Thanks to my colleague who identified a relevant example of this common behavioral trait: United States Senator Charles Schumer (D-NY), arguing for a legislative program to address the shortcomings in the regulation of the financial institutions by whom the capital markets have lately been served so poorly.

Falling into the fallacy, the good Senator advanced an argument that assumed an ideal state of affairs: “You need a tough, strong regulator – unified – no holes in the system ---…who sees the problem ahead of time, so they have complete transparency, they know exactly what’s going on….”[i]

The problem is, Senator Schumer was assuming two impossible aspects of his end state – the availability of an inaccessibly complex body of information on a timely basis, and omniscient regulators free of their manifestly inherent limitations in talent, vision and authority.

Suddenly, I was seeing examples of the Nirvana Fallacy everywhere.

There was the football coach, asked in a pre-game interview about his losing streak, who claimed that, “all we need to turn ourselves around is to sharpen our execution and carry out our game plan.” As the Saturday afternoon results shortly proved, his sunny recipe for redemption of a rapidly fading season failed to acknowledge that his team was fundamentally smaller, slower and less well coached than his opponent.

The Sunday morning television pundits were equally circular in arguing perfected solutions to complex diplomatic challenges. “We accomplish our mission in Afghanistan by disabling the capacity of the Taliban” – a proposition that mistakenly assumes its own conclusion, in the face of centuries of history in which no foreign influence has prevailed in that region.

Or the debaters on the challenging issue of American health care reform, who mouth their competing platitudes of “no government takeover” and “low cost coverage for every single citizen,” while resisting the hard work of reconciling deep and intractable opposing forces and ideological differences.

Or the bureaucrats in India, proposing that the government’s Serious Fraud Investigation Office could effectively probe corporate frauds, if only given power to seize documents and conduct interrogations (here) – while walking right past the plain fact, made stark by the blind-side emergence last winter of the Satyam scandal, that mature, sophisticated securities oversight in India is today no more than a figment of regulatory imagination.

As I try to help my students and my clients alike to become better at identifying and avoiding the traps and sources of bias and error in their decision-making, the Nirvana Fallacy deserves a place of prominent scrutiny and recognition – although it does suffer the dual handicaps of a miserable launching pad and the need for a comprehensible introduction into the area of public discourse.

Completeness obliges identification of the original source – footnoted below.[ii] In good conscience, however, I do not recommend anyone’s diversion of energy into looking there for help. Time spent in academic and scholarly journals can be hazardous to one’s health; as the quoted excerpt shows, those periodicals are the place where simple, lucid writing goes to die.

My students can expect a homework assignment on the Nirvana Fallacy: identify and discuss an illustrative scenario, from work or personal experience or the worlds of political or economic activity. I will expect examples ranging from fancifully assumed cost savings in proposed corporate mergers, to campaign pledges of government largesse free of any of tax increases – or from rejection of a weight-loss plan as too little to be effective, to over-confidence in Sarbanes/Oxley as the cure for all executive venality and excess.

Similar examination of the flaws in the promises and arguments of public debate would benefit us all.

[i] See Sheldon Richman's April 2009 article at the Foundation for Economic Education.

[ii] * Economist Harold Demsetz, Journal of Law and Economics 12 (April 1969) 1:

“The view that now pervades much public policy economics implicitly presents the relevant choice as between an ideal norm and an existing ‘imperfect’ institutional arrangement. This nirvana approach differs considerably from a comparative institution approach in which the relevant choice is between alternative real institutional arrangements.”

Compare this with Voltaire, who needed only the six words borrowed for the title of this piece: “Le mieux est l’ennemi du bien.”

 

Thanks for joining this dialog. Please share with friends and colleagues. And if not a subscriber, please sign on at the Main page – easy, free and non-commercial.