An interesting think piece in the NYT by David Brooks, reflecting on what the current economic crisis can tell us about human decision-making. Conclusion: reason, as another David once said, is the slave of the passions.
In this new body of thought, you get a very different picture of human nature. Reason is not like a rider atop a horse. Instead, each person’s mind contains a panoply of instincts, strategies, intuitions, emotions, memories and habits, which vie for supremacy. An irregular, idiosyncratic and largely unconscious process determines which of these internal players gets to control behavior at any instant. Context — which stimulus triggers which response — matters a lot.
This mental chaos explains how people can respond so quickly and intuitively to so many different circumstances. But it also entails a decision-making process that is more complicated and messy than previously thought.
Rationalism, as this blog has frequently observed, is a peculiar form of mental disorder. It seeks to turn the muddled data we receive from the world of objects into mathematical certainty. In moral philosophy, rationalism is barren. It can do little to move an organism driven by feelings and emotions. In politics, rationalism is dangerous. It dreams of imposing that single formula on the untidy string of compromises, evolved across the centuries, that is social and political life. This irrational craving leads directly to Auschwitz, the gulag, and the killing fields.
Brooks is certainly right to bury the “rational actor” theory of economics. Individuals don’t buy or sell according to some algorithm of utility. The beating heart of economics is desire: a word that covers family, religion, and fellow-feeling as least as much as gluttony or lust.
Whether Adam Smith’s invisible hand has also been disproven is another matter. The hand is invisible because it transcends individuals, and consists of multiple aggregated decisions in the marketplace. If invisible extremities sound too magical, call it the wisdom of crowds. As James Surowiecki wrote, this wisdom can fail for any number of reasons — the herd instinct or echo chamber effect, for example. But all things being equal, no other principle has demonstrated the ability to move resources to the most productive corners of the economy. From aggregated irrationality, a kind of reason emerges.
If algorithms are out of the question, are human decisions then arbitrary — driven by the desire of the moment? Not at all. In great matters and small, personal or universal, we learn to follow a story that weaves into context the traditions, customs, and habits of the community: the adaptive lessons of the past. As much as we can, we shape our desires, and our behavior, to fit the story. We become actors on an age-old drama, and gain meaning for our lives thereby.
When the story frays, when the problems produced by the environment appear to overwhelm the customary solutions — then we go back to the basic texts, to the core of the story, and we turn to our leaders for a re-interpretation. That is what Lincoln achieved, brilliantly, in his second inaugural: he explained the suffering of the Civil War, and the shame of slavery, in the context of the nation’s story, of the foundational ideals and beliefs of the American people.
The present economic mess, according to Brooks, has also overwhelmed our customary solutions. The story is fraying, and people are afraid and confused.
But an economy is a society of trust and faith. A recession is a mental event, and every recession has its own unique spirit. This recession was caused by deep imbalances and is propelled by a cascade of fundamental insecurities. You can pump hundreds of billions into the banks, but insecure bankers still won’t lend. You can run up gigantic deficits, hire road builders and reduce the unemployment rate from 8 percent to 7 percent, but insecure people will still not spend and invest.
If this is correct, it will be incumbent on our new national leadership to deliver a reinterpretation of the American story — one that explains the present circumstances in light of our past, and inspires actions that both resolve the problem at hand but also track with who we are. As with Lincoln’s second inaugural, delivered at the most delicate point in American history, the goal must be the preservation and continuation of the great American story into the future. Even policy, to succeed, must bend to character.