By George Washington of Washington’s Blog.
Investors are basically rational, right?
In fact, as many studies have demonstrated, the answer is no.
But instead of wading through all of the investment psychology research, let’s look at research into people’s basic reasoning abilities. Bear with me for a minute. A study in an area unrelated to investing sheds light on people’s basic thinking processes.
Sociologists from four major research institutions investigated why so many Americans believed that Saddam Hussein was behind 9/11, years after it became obvious that Iraq had nothing to do with 9/11.
The researchers found, as described in an article in the journal Sociological Inquiry (and re-printed by Newsweek):
- Many Americans felt an urgent need to seek justification for a war already in progress
- Rather than search rationally for information that either confirms or disconfirms a particular belief, people actually seek out information that confirms what they already believe.
- “For the most part people completely ignore contrary information.”
- “The study demonstrates voters’ ability to develop elaborate rationalizations based on faulty information”
- People get deeply attached to their beliefs, and form emotional attachments that get wrapped up in their personal identity and sense of morality, irrespective of the facts of the matter.
- “We refer to this as ‘inferred justification, because for these voters, the sheer fact that we were engaged in war led to a post-hoc search for a justification for that war.
- “People were basically making up justifications for the fact that we were at war”
- “They wanted to believe in the link [between 9/11 and Iraq] because it helped them make sense of a current reality. So voters’ ability to develop elaborate rationalizations based on faulty information, whether we think that is good or bad for democratic practice, does at least demonstrate an impressive form of creativity.
An article yesterday in Alternet discussing the Sociological Inquiry article helps us to understand that the key to people’s active participation in searching for excuses for actions by the big boys is fear:
Subjects were presented during one-on-one interviews with a newspaper clip of this Bush quote: “This administration never said that the 9/11 attacks were orchestrated between Saddam and al-Qaeda.”The Sept. 11 Commission, too, found no such link, the subjects were told.
“Well, I bet they say that the commission didn’t have any proof of it,” one subject responded, “but I guess we still can have our opinions and feel that way even though they say that.”
Reasoned another: “Saddam, I can’t judge if he did what he’s being accused of, but if Bush thinks he did it, then he did it.”
Others declined to engage the information at all. Most curious to the researchers were the respondents who reasoned that Saddam must have been connected to Sept. 11, because why else would the Bush Administration have gone to war in Iraq?
The desire to believe this was more powerful, according to the researchers, than any active campaign to plant the idea.
Such a campaign did exist in the run-up to the war…
He won’t credit [politicians spouting misinformation] alone for the phenomenon, though.
“That kind of puts the idea out there, but what people then do with the idea … ” he said. “Our argument is that people aren’t just empty vessels. You don’t just sort of open up their brains and dump false information in and they regurgitate it. They’re actually active processing cognitive agents”…
The alternate explanation raises queasy questions for the rest of society.
“I think we’d all like to believe that when people come across disconfirming evidence, what they tend to do is to update their opinions,” said Andrew Perrin, an associate professor at UNC and another author of the study…
“The implications for how democracy works are quite profound, there’s no question in my mind about that,” Perrin said. “What it means is that we have to think about the emotional states in which citizens find themselves that then lead them to reason and deliberate in particular ways.”
Evidence suggests people are more likely to pay attention to facts within certain emotional states and social situations. Some may never change their minds. For others, policy-makers could better identify those states, for example minimizing the fear that often clouds a person’s ability to assess facts …
The Alternet article links to a must-read interview with psychology professor Sheldon Solomon, who explains:
A large body of evidence shows that momentarily [raising fear of death], typically by asking people to think about themselves dying, intensifies people’s strivings to protect and bolster aspects of their worldviews, and to bolster their self-esteem. The most common finding is that [fear of death] increases positive reactions to those who share cherished aspects of one’s cultural worldview, and negative reactions toward those who violate cherished cultural values or are merely different.
Fear in the Economic and Financial Arenas
Has something similar happened in the economic/financial arenas?
Congressmen Brad Sherman and Paul Kanjorski and Senator James Inhofe all say that the government warned of martial law if Tarp wasn’t passed. And Rahm Emanuel famously said:
Never let a serious crisis go to waste. What I mean by that is it’s an opportunity to do things you couldn’t do before.
Last year:
- Senator Leahy said “If we learned anything from 9/11, the biggest mistake is to pass anything they ask for just because it’s an emergency”
- The New York Times wrote:
“The rescue is being sold as a must-have emergency measure by an administration with a controversial record when it comes to asking Congress for special authority in time of duress.”
***Mr. Paulson has argued that the powers he seeks are necessary to chase away the wolf howling at the door: a potentially swift shredding of the American financial system. That would be catastrophic for everyone, he argues, not only banks, but also ordinary Americans who depend on their finances to buy homes and cars, and to pay for college.
Some are suspicious of Mr. Paulson’s characterizations, finding in his warnings and demands for extraordinary powers a parallel with the way the Bush administration gained authority for the war in Iraq. Then, the White House suggested that mushroom clouds could accompany Congress’s failure to act. This time, it is financial Armageddon supposedly on the doorstep.
“This is scare tactics to try to do something that’s in the private but not the public interest,” said Allan Meltzer, a former economic adviser to President Reagan, and an expert on monetary policy at the Carnegie Mellon Tepper School of Business. “It’s terrible.”
Not Just Government
But it’s not just government . . .
If the too big to fails say that the world economy will crash and there will be martial law unless they are bailed out, politicians – most of whom don’t understand finance or economics – will believe them, and sound the alarm themselves.
As Karl Denninger wrote yesterday:
[AIG’s CEO] left Geithner with two documents. One was a fact sheet that listed all the attributes of AIG FP [the division run by Joe Cassano that blew the company up] and argued why it should be given status as a primary dealer. The other–a bombshell that Willumstad was confident would draw Geithner’s attention–was a report on AIG’s counterparty exposure around the world, which included “2.7 trillion of notional derivative exposures, with 12,000 individual contracts.” About halfway down the page, in bold, was the detail that Willumstad hoped would strike Geithner as startling: “$1 trillion of exposures concentrated with 12 major financial institutions.”
Was that a threat?
And isn’t threatening the United States (whether directly or otherwise) something you’re not supposed to do?
Sounds like “Bail me out or I will crash everything.”
Isn’t that analagous to walking into a bank, opening one’s coat to reveal an explosives-laced belt, and saying “gimme all the money or everyone dies!”
Yves Smith has previously used a similar analogy.
Fear Among Individual Investors
Investors – as with politicians or Americans in general – believe that “when [they] come across disconfirming evidence . . . . they tend to … update their opinions”, but in reality, they cling to the beliefs they formed during certain heightened emotional states, such as fear.
Fear turns people into sheep. Once they are sheep, they will strive mightily to justify the actions of their “leaders” – whether those leaders gave trillions of dollars in bailouts or got us into war, and even if the leaders’ justifications were false.
I believe this dynamic is also playing out in the fact that many Americans assume that the government has a real plan for fixing the economy, is working as hard as it can to do so, and that – eventually – things will improve.
Just as most Americans believe “since we’re at war in Iraq, and since the government previously claimed that Saddam was behind 9/11, he must have been”, they are probably thinking “since the government gave trillions to the giant banks and said that economists have figure out how to fix things, they must have done what was needed, and things will turn around in a v-shape recovery”.
The lengths people go to rationalize a false link between Saddam and 9/11 is a great example, because it may reveal by analogy how far people will go to justify their trust in our economic leaders and in their own investment decisions.
Of course, the yearning for high returns is the other half of what drives investor psychology. But this essay focuses on fear.
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Well one could argue, I suppose, that Hitler was responsible
and Tojo was not, but its a distinction without a difference if you were being marched to death to Treblinka or Bataan.
I think most Americans viewed Saddam Hussein ( an admirer of Hitler) and Osama bin Laden in much the same light ( a man whom I doubt would have found much to criticize about der Fuhrer) so let’s not split hairs here.
After 9/11 we needed to kick some ass. Didn’t matter much whom it was as long as it was kicked good and hard. It was for instructional purposes if you can understand. Osama didn’t have a nation state. Saddam did. We’d dealt with him before and found the results unsatisfactory.
Where Bush went wrong was to engage in ‘nation building’. The purpose of the exercise was not to show the Islamic world how we could ‘rebuild’ them but to show them how they would be left with 21st century populations and 10th century know how after the USAF and Naval Aviation had done their thing. Shock and Awe. It would’ve have worked too had that been done. Deconstruct Iraq and Afghanistan and then, after they’d stewed in their own juices for a few years, offered them ‘charity to all and malice towards none’.
By the same token, we need to do the same to our own bully boys. TBTF, well we’ll see about that. Instead of the Federal Reserve and US Treasury engaging ‘recapitalizating’ our financial terrorists we should have hunted them down and conducted a ‘Judgement at Nuremburg’ with their leaders.
Not to defend the average sheep, but there is a huge difference between people believing something abstract that doesn’t affect them (Iraq) and believing something that directly affects them (their investments). People pay a lot better attention to their own investments. I’ve even known people that think Iraq had WMDs but actually articulate very good investment logic and do well.
Jonathon Haidt, author of the “Happiness Hypothesis” calls this phenomenon our internal lawyer, the crafty shyster that always trumps truth, reason or consciousness in defending our own desires, actions and beliefs, or those of our tribe (country, political party, or race).
I like Haidt’s formulation. My shorthand for this phenomenon is “Humans are too smart to be divorced from their stupid opinions by facts and logic alone.” Obviously, the stupid opinions are almost always initially born of the holder’s self-interest and usually held onto with fierce strength till death. Internal lawyer, that is great. Thanks.
Sorry to spout off again but the WMD thing, and Saddam carefully cultivated the idea, was irrelevant. It was the ONLY approach the United States had to ‘win’ UN approval. Firing on US and UK aircraft wasn’t going to do it. ‘Violating’ the ‘terms’ of the 1991 ceasefire wasn’t going to do it. The fashionable people and the EU needed an excuse to ‘lower the boom’ on the dictator types.
An credible but expendable buffoon was sent to present a plausible case to the UN and Colin Powell was chosen. As Powell executed his only real mission in life the real military went into conference. Here there was deep disagreement. Shinseki e.g. was sent down faster than you can say Singlaub and for the same reasons. He questioned the CinC.
Two weeks to Bagdhad showed that Rumsfeld had it about right but Bush turned victory into ashes.
There’s only one problem with your theorizing, and that is that there is pretty overwhelming evidence that the public never fell for the Bush/Paulson swindle. I couldn’t find any public polls immediately before TARP was passed, but I did find this:
Overall, these numbers are little changed since last October. When Congress was passing the unpopular $700-billion bailout plan in the heat of a presidential campaign and a seeming financial industry meltdown, 59% wanted to throw them all out. At that time, just 17% wanted to keep them.
http://www.rasmussenreports.com/public_content/politics/general_politics/august_2009/57_would_like_to_replace_entire_congress
You’re theorizing, trying to explain something that never happened.
Basicly, there are 6 types of people:
people that never figure out tic-tac-toe, and lose most of the time;
people that figure it out, and are happy to tie every time, or let the spoiled brat win occasionally, and act surprised;
people that will pay whatever it costs to be part of the group that gets to make the first move;
people who are born with the right to make the first move;
people who go out and design another game at the cost of exclusion from tic-tac-toe, which is irrelevant because just seeing tic-tac-toe makes them sick;
and people who design a new game, and expect to roll it out to the people content to play tic-tac-toe.
You cannot force people to migrate into the future, or prevent them from being ignorant, but those very same people will desperately attempt to prevent anyone else from leaving.
Evolution waits for no one, and it favors those that naturally swim against the current.
Incremental improvement, swimming with the current, always ends with a system lock up when a code line cannot be executed because of an unexpected condition. Those self-conditioned to swim against the current are best conditioned to find an alternative.
Individuals have a choice. They can ditch the non-performing assets and climb the mountain to the next valley, or they can continue clinging to those non-perfoming sunk costs, which are an anchor around their neck, and drown.
And they are just as likely to drown you if you get closer than required to throw a line, one that you can cut at any time.
So true!
Reading these comments is instructive. I’m again surprised at the depth of libertarian (a polite term) feeling among articulate Americans. So how will it play out? First you blow up foreigners, then you blow up each other, finally you blow up yourselves? The depths of these feelings of distrust, resentment, even hatred, is appalling.
When did the Bush admin tie Saddam directly with 9/11? Don’t believe it ever happened, and if it did the admin repeatedly asserted the fact they weren’t based on the same evidence we all had that the link between 9/11 and Saddam wasn’t there.
There was however much evidence connecting Saddam and Al Qaeda, other terror groups etc.
aaa, I’m not sure if you meant to, but you proved Washington’s point perfectly. Bra-aaa-aaa-vo!
You brilliantly convinced yourself to read things not actually written. Bush, Cheney and all Neocons were, in fact, meticulously careful not to make any explicit link of Saddam and 911 link, and all serious critics have noted that clearly. Instead, they made the connection cleverly by constantly associating the two within the same speeches and sentences over and over again, so that by incessant juxtaposition of the two, mingled with fear-barbs of mushroom clouds and bio-attacks, the mesmerized sheep inevitably made their own connection. By beating around the bush (no pun intended) their propaganda was brilliantly effective.
As for the Saddam-al Qaeda connection, as rkka notes below, the two were so obviously oil and water, except to culturally ignorant Americans. The only scant evidence was second-hand heresay, since debunked just like the Niger yellowcake forgery. You are a stellar (and scary) exemplar of Washington’s thesis.
Well this article certainly stirred up a lot of testerosterone… Though I’m not sure how relevant it is to investing. Fear can make people irrational, but it can also do the opposite: bring people back to rationality after having gone made with greed. People who all along should have been in short-term bonds rather than stocks ARE now mostly in short-term bonds and planning to stay there now that they’ve been burnt badly. That isn’t sheep like behavior, that is being rational and humble about their situation in life. Not everyone is in a position to take on the risks of the stock market, regardless of how much better the returns are on stocks than short-term bonds, just as not everyone is in a position to run their own business.
That really is fear: being in short term bonds means you are going to get eaten by dollar devaluation.
Hysterical nonsense, a fine example of irrational fear. I was referring to people who will may need their money at any time, due to unemployment or emergencies. That sort of money should never have been in stocks and it was fear that made people realize this truth. It is true that money in short-term bonds won’t gain much if anything after taxes and inflation, but it won’t lose much if any purchasing power either.
I should have been more clear. Moving out of stock is not a bad move, but leaving it all in dollars or short term dollar denominated is. Our treasury is printing money like mad. So are other central banks. I do not believe in gold as a currency or an investment. I see it as a close to worthless piece of metal. So the question is where to put your money?
For me that means a mixed bag of currencies and short term bonds.
In conclusion, I do not think short term instruments is incorrect, but I think all dollar is incorrect.
It’s actually pretty amazing how many people here in the USA consider themselves “investors” and are eager to play in this casino taking into account the net result of their “investment efforts”.
And I wonder what “reasonable” return on “investment” should sheeple expect if for the next decade average exaggerated (by fudged deflator) GDP stabilizes around 2-3% a year.
My impression is that for 401K “investors” and like it’s pretty difficult to beat “stable value” fund and probably much less then 20% managed to do that during the last decade. Current losses (in comparison with investment in Vanguard stable value fund) for those who invested in S&P500 using cost averaging since Jan 1996 are around 30%.
Read carefully the several responses defend the discredited connection between Saddam, Bin Laden and 911. They are crystal clear examples of what this article was all about. All things being equal, the position with the greater weight of empirical evidence is generally thought to be “the truth.”
Of course, nothing but religion can really bring this subject in to the full light of day. As I witness every day, people will cling to their superstitions and angry jealous gods regardless of the fact (I really should say FACT!! but I’m too polite to yell) that no evidence what-so-ever exists that supports astrology, numerology, Jesus or the Devil. Instead of everyone just admitting that we were fooled by some guys wearing robes in big fancy building, we’ll cling to those beliefs because it is just too difficult to admit that we were wrong (and all the things we did in the name of religion were wrong too) and move on.
Someone tell me I’m wrong.
Your nickel beats my two cents, and as a missionary kid, I can dig your disdain for robed high priests with their opium of false idols, prosperity, and their support for salughter. But in this case I think Rummy may have an answer for you. “Absence of evidence is not evidence of absence.”
I think most honest people of faith, even Einstein, are or were at least part-time agnostics because of what they percieve as a veil between this dimension and a higher one where astrophysics seem to merge with metaphysics, transcending supposedly immutable materialist laws. When even the substance of atoms is discovered to be literally no more than an illusion of vibrating energy, and Hubble can peer into dark space to dicover countless galaxies as innumerable as the stars in our own…and then, get this, astronomers now say almost all “matter” in the universe is not even visible. Now plumb the unfathomable mysteries of the human mind as George Wahington does here and it’s hard not to exclaim, “oh my God!”
“Of course, nothing but religion can really bring this subject in to the full light of day.”
I reckon the two are not just related in nature, but that the one actually drives the other, deliberately at that. At a young age, religious indoctrination trains the victim (there is simply no other way to put it) to have belief based on faith and not evidence. I particularly remember the insidious ‘Doubting Thomas’ story as a kid, when Thomas demands evidence he is basically bullied into embarrassment about even thinking of demanding it. Great thing to teach a child (that was the catholic story, I don’t know if it so pointedly used in other christian faiths).
Once indoctrinated that you must have faith and belief without evidence, it isn’t much of a stretch to believe just about anything at all, particularly when delivered by a preaching `father’ figure.
A bit of harmless belief in faerie tales as a child isn’t really going to do anyone much harm. But part of growing up is being able to tell the difference between such whimsy and reality. Even with all the indoctrinational[sic] abuse as children, many kids grow out of that nonsense around 12 as this natural part of growing up.
But this may be where things get interesting by synergising with the American culture (in particular, but western culture in general). People never really grow up. The focus is on having fun, enjoying sport and other forms of games and competition (even work is a game/competition in the usa), mindless entertainment, not thinking too hard about anything, doing stupid stuff without having to really deal with the consequences, or even knowing what they might be, and making sure you fit in with your peers so you’re not picked on.
That is, a type of permanent adolescence which seems to pervade the culture. Nobody really wants to grow up and face adulthood, and in this culture they seem to be able to get away with it. It is even celebrated!
Pretty well all other cultures have some sort of meaningful ‘initiation ceremony’ after which you are no longer a child and must become and behave as an adult. With all that implies and requires. About the closest it comes in Western society today is ‘getting a job’, ‘getting a car’, ‘getting drunk’, or ‘getting a root’. Often in some combination.
Back on topic a bit – as a gross generalisation, US/western society spits out obedient workers, not those trained to question the world around them. And religion is a convenient tool used to aid that outcome.
Good article.
Most human decisions are largely colored by emotions, thus significantly diminishing our ability to reason rationally.
Fear is indeed a very powerful factor, and it pervades all aspects of American life. In addition to fear, the American mind is also plagued by narcissism, which prevents us from truly learning from past mistakes. Much of our behavior resembles the definition of craziness, namely repeating the same mistakes expecting different results. We likely won’t learn our lessons until we are a broke, defeated, and conquered people.
Vinny
Vinny it looks like a cult issue and as you know even days or a few weeks of exposure can take a year maybe two to over come the effects.
Ive moved and changed locations within the states and internationally so often and through out my life, that one local mindset never really cemented itself. Hence Ive always been a bit of an outsider, but at the same time feel I have a unusual perspective.
Here in Australia the indigenous people have the old habit of *walk about* I highly recommend it. People would be surprised at the benefit of reflection. Today sadly its off to some tourist trap or designation destined to overload their minds in order to forget their day to day lives and clear their minds from the chaos some call the real world.
Skippy…the cult of TBTF or the cult of America, we are not allowed to fail….shezz no wonder we can not learn from our mistakes, we don’t have any…or thats just what we tell our selves..eh…is America TBTF really?
Indeed, America is a bit of a cult. And I think it’s certainly not TBTF. It’s already fallen, just that it doesn’t know it yet. I think that if it weren’t for Silicon Valley and companies like Apple, HP, and Microsoft, attracting foreign talent, this country would have gone broke 10 years ago. But even Apple can’t keep 300 million deadbeats afloat… especially when they manufacture everything in China.
I’ve moved a lot too, and I have a similar perspective as yours. I can see through the bullshit pretty quickly. The only style I have embraced is the Balkan style, which is my native style and also completely opposite what you’d expect an analyst to be like. But hey, my patients always pay their bills on time, usually before I have to break their legs…LOL
Vinny
Vinny said…But hey, my patients always pay their bills on time, usually before I have to break their legs…LOL
I toast your Balkans ethos with a nice aperitif of home made Rakija, Zivjeli!!
“There was however much evidence connecting Saddam and Al Qaeda, other terror groups etc.”
No, there wasn’t. Saddam, being a secular Arab nationalist, thought AQ a pack of medivalists. AQ thought Saddam was an apostate.
They did not get along, at all.
Again, I must vehemently object to your theory. The Iraq and TARP situations were completely, totally different.
The most striking difference is that with Iraq, the Bush administration did manage to get a majority of the American public on board. With TARP, it did not. The American public is and always has been strongly opposed to TARP.
Maybe the congress and senate did buy into the ominous invocations of financial and social Armageddon articulated by the apostles of Wall Street. But you have to remember, the administration was not playing to an unbiased jury—the senate and congress were at the time, and still are, bought and paid for. Any argument the administration put forth—and it matters not a scintilla how nonsensical or irrational it was—would have been readily accepted by the legislature.
Your analysis is just too simplistic and doesn’t square with factual reality. Fear is only one of many emotive responses that drive human behavior.
Besides fear, humans are motivated by another “irrational” urge that the psychologists call “strong reciprocity,” described here by Herbert Gintis et al:
By strong reciprocity we mean a propensity, in the context of a shared social task, to cooperate with others similarly disposed, even at personal cost, and a willingness to punish those who violate cooperative norms, even when punishing is personally costly.
http://www.umass.edu/preferen/gintis/SocJusticeRes.pdf
In selling the Iraq war to the American public, strong reciprocity would have worked in favor of the administration. The American public wanted to reach out and punish somebody, even if they realized it was going to be “personally costly.” The administration took advantage of this and, through a campaign of lies and calumny, managed to make that “somebody” Saddam Hussein and Iraq.
In selling TARP, however, strong reciprocity would have worked against the administration for two reasons:
1) The American public by this time had the administration’s number, and knew it had been lied to and betrayed in the selling of the Iraq war. Therefore the object of punishment by this time would be the administration, and
2) The American people were able to see who was mostly to blame for the financial crisis, which was the financial overlords, and it wanted its pound of flesh, even if was going to be “personally costly.”
Again, just let me reiterate: The American public was NEVER–not last fall, not now—swayed by the administration’s arguments regarding TARP nor by the fear mongering of those you cite like Congressmen Brad Sherman, Paul Kanjorski, Senator James Inhofe or Rahm Emanuel.
Your theory of fear fails to explain why it worked with the American public in the Iraq war situation and didn’t work in the TARP situation.
Downsouth said…Your theory of fear fails to explain why it worked with the American public in the Iraq war situation and didn’t work in the TARP situation.
May I offer my silly opinion, Americans really like letting the military off the leash, go kick ass, show the world who is numoro uno, they bloody love it! Like in American football they stand over the guy just knocked out, taunt the opposition when you score, rub the loss in their face, grandstand at every opportune moment, displaying your greatness.
During the last two wars in Iraq I witnessed every day people cheering at restaurant’s, bars, hell any where a TV was on showing the bombing, the tanks moving forward, the just and valiant solider defeating the enemy. All the disparaging remarks about anyone from the middle east, their clothing, looks, customs etc and how they were to blame for every thing and only getting their just rewards.
TARP is easy, its money straight into other people pockets (rich people), it does not make you feel better about your self as an American. It does not increase our standing internationally, in fact it decreases it, it makes us look stupid and feeble, knocks us down a peg, Americans like to WIN not LOSE and at all costs, that is the history we learn in school and is preached from above be in a church, class room or our government.
TARP attacks the American winning tradition.
Skippy…The war applauders, people of so called good merit, church going, hard working, family types, people with degrees…all across America, I saw it and remember my horror. All this from people that have never seen death up close, brutally dispatched, day in and out and call returning soldiers with PTDS whiners.
You know, when Bush started this war in Iraq I was contracting for a VA hospital in New York. The military was sending hundreds of thousands of young people in harms’ way, and you know what that war criminal, deer-in-the-headlights low-IQ moron, conniving SOB did? He cut about 50% of funding of our hospital. He needed the money for Dick Cheney’s Halliburton.
We had injured vets sleeping in sleeping bags on the floor because we could no longer keep the heat going in large wings of the hospital.
And, as you say, the average drunken moron was cheering in bars across the country when the laser-guided bombs were killing innocent Iraqi civilians (at a million dollar a pop in the pockets of criminal companies like Rayethon, might I add).
Vinny
Good points.
If I may add a remark, the strong reciprocity part is much weaker in the US as compared to other cultures. America lacks a true sense of community, and even first degree family relations are weak to the point of pathological. Here it’s things like individualism and “looking out for number one” that matter. Here you’re supposed to kick your kids out of your house on their 18th birthday, and then expect that they’ll kick you into a nursing him as soon as you break your hip in your old age. Pretty sick mentality. But hey, it works wonders at controlling large masses people. The “divide and conquer” adage works as well now as ever.
As far as fear goes, everything here is based on fear.
Vinny
What is most interesting is that people having little or nothing in the way of information have the most definite opinions and are encouraged to believe in their right to have them. Propaganda does the rest.
Focusing for the moment on ‘investing’, anyone who truly understands today’s markets knows that since financial reports are pure fiction financial analysis is merely propaganda and true investment is simply impossible. You have traders doing their best to snatch returns from one another and a tide of excuses every time the $hit hits the fan. It isn’t merely that most people are wrong but rather that nearly everyone who thinks he knows something important is wrong about both what’s important and what he thinks he knows. The truth is you can’t know anything worth knowing and must decide whether it might pay to guess. If you do guess you immediately become dependent upon the veracity of those who have already proved themselves entirely untrustworthy and largely incompetent. Good luck with that.
Brutal, bitter. Right.
The less people know, the more confident they are in what they don’t know, and the less interested they are in being educated.
The stupid are cocksure and the intelligent are full of doubt. — Russell
Like to trot that one out every now and again. The trouble with the world…
Well, people spend their whole lively hoods at casinos too. They can surely do the maths and realise they wont win on balance, but they’ve seen someone else hit it big, and they really believe they’ll be next. Is the stock market any different for individual ‘investors’?
Down South is onto something when he mentions that “fear is
only one of many emotive responses that drive human behavior.” David Hume was also into the same perspective when he argued that reason is simply a scout for the passions.
If all of us are primarily driven by our passions then it may be quite likely that we build our supposed rational conclusions into our assumptions in order to justify a choice which we have already made emotionally.
The realtionship between thought and emotion may be the key here.
The idea that people are rational actors is a fiction that some of the classical and now neo-classical economists dreamed up to justify their models and theories. The enlightenment writers all struggled with the problem of wanting a more business friendly and, therefore, more democratic world but having such irrational human creatures populate it. Two central planks were proposed and built that were supposed to promote more rational thought among the masses, state-protected free speech rights in the public sphere and universal liberal arts education. Realizing either of these has been problematic since the late 18th century. Certainly in the US the state protects free speech but does nothing to control the monopoly of access to the public sphere where speech must be freest if people are to be able to weigh different opinions. The US state also has provided public education but it is nothing remotely close to a liberal education, much more indoctrination than anything else. Again, the US state allows a monopoly of the public sphere in education (either by state bureaucrats or corporations — often a marriage of the two).
I’m hoping anger will turn us into revolutionaries.
Hopefully Americans won’t react the same way for 9/11 as they do with there investments since that affects most of them more. Also I think this is a valid point but people will always act irrationally during an emergency if they are think they are doing the right thing.