Creatures of Myth

Human behavior makes a lot more sense when you appreciate that none of us are entirely rational. In fact, I’d go so far to say that for most of us rational thinking accounts for very little of our views and opinions about anything. Most of us live inside any number of personal and collective myths that inform us who we are and how the world is supposed to work, and it can be damn near impossible to dispel the myths even with clear and irrefutable facts and data.

This has little to do with IQ, as it’s not at all unusual even for bright people to cling to beliefs that are measurably out of sorts with the real world. As I wrote in my book, to be a reasonably rational person you must first admit to your own irrationality. If you can’t do that, you will remain at the mercy of the various goblins, trolls and pixies in your head.

Paul Krugman — in my judgment, more rational than most people — has a blog post up now called Inflation, Septaphobia, and the Shock Doctrine in which he struggles to understand why allegedly Wise Men (and it is mostly men) guiding the world’s economies are such a pack of idiots.

The bad news from Europe is a reminder that the basic insight some of us have been trying to convey, mostly in vain, ever since 2008 remains valid: the great danger facing advanced economies is that governments and central banks will do too little, not too much. The risk of elevated inflation or fiscal difficulties is dwarfed by the risk of ending up trapped in a deflationary vortex. This view has been overwhelmingly supported by recent experience — if you acted on what they were saying on CNBC or the WSJ editorial page, you would have lost a lot of money. Yet the power of the hard money/fiscal austerity orthodoxy (yes, market monetarists want one without the other, but they have no constituency) remains immense. Why?

Well, that’s the question, isn’t it? Along with charts and graphs showing that the hard money/fiscal austerity orthodoxy is just plain wrong, Krugman speculates a bit about what kind of mythology is driving it. The word septaphobia means “fear of the seventies,” btw, referring to the fact that the 1970s were marked by inflation and were a bad time for investors. The Wise Men may be running hysterically from the ghosts of the 1970s — ghosts haunting their own heads — and ignoring the very different real-world beasts that are the cause of today’s economic problems.

Thomas Frank has an article up at Salon called The 1 percent’s long con: Jim Cramer, the Tea Party’s roots, and Wall Street’s demented, decades-long scheme. As the title suggests this is a lot about how the 1 percent manipulates the world to benefit themselves. But if you read between the lines a bit, this article is also about myths and the way Wall Street portrayed itself in the 1990s as the true friends of Everyman and as shamans of a kind of economic democracy that was more fair and egalitarian than governmental-type democracy.  This is an excerpt from a book, and while I don’t know where Frank goes with this next one suspects he discusses the self-delusions that gave us the financial meltdown of 2008. But it also suggests that the New Deal was still looming in the personal myths even of people too young to remember the FDR Administration.

And there were incredible prizes to be won as long as the bubble continued to swell, as long as the fiction of Wall Street as an alternative to democratic government became more and more plausible. Maybe the Glass-Steagall act could finally be repealed; maybe the SEC could finally be grounded; maybe antitrust could finally be halted. And, most enticingly of all, maybe Social Security could finally be “privatized” in accordance with the right-wing fantasy of long standing. True, it would be a staggering historical reversal for Democrats to consider such a scheme, but actually seeing it through would require an even more substantial change of image on Wall Street’s part. The financiers would have to convince the nation that they were worthy of the charge, that they were as public-minded and as considerate of the little fellow as Franklin Roosevelt himself had been. Although one mutual fund company actually attempted this directly—showing footage of FDR signing the Social Security Act in 1935 and proclaiming, “Today, we’re picking up where he left off”—most chose a warmer, vaguer route, showing us heroic tableaux of hardy midwesterners buying and holding amidst the Nebraska corn, of World War II vets day-trading from their suburban rec-rooms, of athletes talking like insiders, of church ladies phoning in their questions for the commentator on CNBC; of mom and pop posting their very own fire-breathing defenses of Microsoft on the boards at Raging Bull. This was a boom driven by democracy itself, a boom of infinite possibilities, a boom that could never end.

We can always debate how much of this the Captains of Finance actually believed themselves, and how much of it was PR, but I think the financial crisis showed us they really were not behaving rationally at all. They became convinced they were immortal; that bullets would not kill them; that whatever they did was blessed because they were doing it. Greed was driving a lot of this myth, of course. I don’t doubt those who survived the meltdown still believe this, and why wouldn’t they? The government protects them from having to face their own mortality.

More to the point, as Krugman says, sometimes these myths actually are not supporting their own long-term financial health in any rational way.

And this crew of mostly Asuras are ultimately the ones responsible for the fiscal austerity orthodoxy, possibly because in their mythical world somebody should suffer for the setbacks of the 2000s, but it shouldn’t have to be them.

Postscript — one more thing — whenever I cite Krugman for anything I can count on somebody, somewhere, snorting at me that Krugman is an idiot and Krugman is always wrong. But if pushed, such people can never explain coherently what he has been wrong about. Push harder, and it becomes clear that Krugman is “wrong” because he disagrees with the orthodoxies and the myths, not because what he writes is frequently proven untrue. It isn’t, actually.

9 thoughts on “Creatures of Myth

  1. Krugman, being a liberal, has empathy for others – especially, those worse off than himself.
    Conservative, being… well, themselves, have no empathy for others, and feel that pain is good for others – as long as it’s not themselves.

  2. If you can’t do that, you will remain at the mercy of the various goblins, trolls and pixies in your head.

    Shouldn’t that be goblins, trolls, pixies…and saviors ?

  3. The rich and financial institutions love austerity and hard money because it increases the value of their bond holdings. If it also trashes the economy and puts millions out of work, they don’t care.

  4. As a working stiff member of the Tea Party, my purpose in life is to dedicate my work to the service of those more fortunate than myself, and I trust in them to use their wealth wisely.

  5. Krugman is not always right. One of the things that differentiates him from most of his critics (besides being right far more often than they) is that you can find out that Krugman was wrong in columns written by Krugman explaining that he was wrong.

  6. Groupthink. The emperor’s new clothes.

    Summary of Groupthink. Abstract
    Irving Janis (1972)

    Irving Janis developed a study on group decision making based on human social behavior in which maintaining group cohesiveness and solidarity is felt as more important than considering the facts in a realistic manner. Janis gave the following definition of Groupthink (GT):

    A mode of thinking that people engage in when they are deeply involved in a cohesive group, when the members’ strivings for unanimity override their motivation to realistically appraise alternative courses of action.

    GT is a result of cohesiveness in groups, already discussed by Lewin in the 1930s and is an important factor to consider in decision processes, such as workshops, meetings, conferences, committees, etc.

    Certain conditions are conducive to Groupthink, such as:

    The group is highly cohesive
    The group is isolated from contrary opinions, and
    The group is ruled by a directive leader who makes his or her wishes known.

    The following negative outcomes of GT are possible:

    The group limits its discussion to only a few alternatives.
    The solution initially favored by most members is never restudied to seek out less obvious pitfalls
    The group fails to reexamine those alternatives originally disfavored by the majority.
    Expert opinion is not sought
    The group is highly selective in gathering and attending to available information
    The group is so confident in its ideas that it does not consider contingency plans.

    A few methods to prevent Groupthink are:

    Appoint a devil’s advocate
    Encourage everyone to be a critical evaluator
    Do not have the leader state a preference up front
    Set up independent groups
    Divide into subgroups
    Discuss what is happening with others outside the group
    Invite others into the group to bring fresh ideas
    Gather anonymous feedback via a suggestion box or an online forum

    What are typical symptoms of GT?
    Janis listed eight symptoms that show that concurrence seeking has led the group astray.

    The first two stem from overconfidence in the group’s powers. The next pair reflect the tunnel vision members use to view the problem.

    The final four are signs of strong conformity pressure within the group.

    Illusion of Invulnerability: Janis summarizes this attitude as ‘‘everything is going to work out all right because we are a special group.” Examining few alternatives.
    Belief in Inherent Morality of the Group: under the sway of GT, members automatically assume the rightness of their cause.
    Collective Rationalization: a collective mindset of being rational. Being highly selective in gathering information.
    Out-group Stereotypes
    Self-Censorship: people only offer equivocal or tempered opinions. Not seeking expert or outside opinions. Pressure to conform within group; members withhold criticisms.
    Illusion of Unanimity. Individual group members look to each other to confirm theories.
    Direct Pressure on Dissenters. Pressure to protect group from negative views or information.
    Self-Appointed Mindguards: these ‘‘mindguards” protect a leader from assault by troublesome ideas.

  7. Thank you, priscianusjr. That perfectly describes the boards of at least two organizations that I belong to. “Ruling by consensus” in these groups tends to mean either ostracizing those who hold opposing points of view or talking issues to death, that is, talking and talking and talking till everyone is sick & tired of the issue and just votes w/ the majority to get the issue off the table. Or sometimes, talking and talking and talking for enough years that you achieve consensus through changes in board membership.

  8. “They became convinced they were immortal; that bullets would not kill them;” – as inequality rises they are tempting fate. Their own words of “because we could” will come back to haunt them…

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