Archive for the ‘psychology’ Category

Discounting the obvious

April 24, 2013

The main events in the history of science have involved new ideas overthrowing conventional wisdom. The notion that the earth was the center of the universe was upended by Copernicus. Species were thought to be permanent and fixed until Darwin. Physics was thought to be completely understood at the end of the nineteenth century and then came relativity theory and quantum mechanics to mess everything up. Godel overthrew the notion that mathematics was infallible. This story has been repeated so many times that people now seem to instinctively look for the counterintuitive answer to every problem. There are countless books on thinking outside of the box.  However, I think that the supplanting of “linear” thinking with “nonlinear” thinking is not always a good idea and sometimes it can have dire consequences.

A salient example is the current idea that fiscal austerity will lead to greater economic growth. GDP is defined as the sum of  consumption, investment, government spending and exports minus imports. If consumption or investment were to decline in an economic contraction, as in the Great Recession, then the simple linear idea would be that GDP and growth can be bolstered by increased government spending. This was the standard government response immediately after the financial crisis of 2008. However, starting in about 2010 when the recovery wasn’t deemed fast enough instead of considering the simple idea that the stimulus wasn’t big enough, the idea that policy makers, especially in Europe, adopted was that government spending was crowding out private spending so that a decrease in government spending would lead to a net increase in GDP and growth. This is very nonlinear thinking because it requires a decrease in GDP to induce an increase in GDP. Thus far this idea is not working and austerity has led to lower GDP growth in all countries that have tried it.  This idea was reinforced by a famous, now infamous, paper by Reinhart and Rogoff, which claimed that when government debt reaches 90% of GDP, growth is severely curtailed. This result has been taken as undisputed truth by governments and the press even though there were many economists who questioned it.  However, it turns out that the paper has major errors (including an Excel coding error). See here for a summary.  This is case where the nonlinear idea (as well as conflating correlation with causation) is probably wrong and has inflicted immense hardship on a large number of people.

 

Cognitive dissonance

February 12, 2012

The New York Times has a story today describing how the American middle class are becoming more reliant on government aid, much to their chagrin.  However, the reaction of many of the people interviewed  is animosity towards government programs and support for culling them, even though that would hurt themselves economically.

New York Times: One of the oldest criticisms of democracy is that the people will inevitably drain the treasury by demanding more spending than taxes. The theory is that citizens who get more than they pay for will vote for politicians who promise to increase spending.

But Dean P. Lacy, a professor of political science at Dartmouth College, has identified a twist on that theme in American politics over the last generation. Support for Republican candidates, who generally promise to cut government spending, has increased since 1980 in states where the federal government spends more than it collects. The greater the dependence, the greater the support for Republican candidates.

Conversely, states that pay more in taxes than they receive in benefits tend to support Democratic candidates. And Professor Lacy found that the pattern could not be explained by demographics or social issues.

Cognitive dissonance is a term in psychology that describes the uncomfortable feeling when two conflicting thoughts are simultaneously held and the attempts to rationalize the inconsistency. The political dynamics currently playing out in the United States may be a giant manifestation of this phenomenon.  A telling aspect of the article was that many of the people interviewed acknowledged that they could not survive without government assistance but felt that they did not deserve such help and preferred that it be reduced rather than subjecting others to higher taxes to pay for it.   This rather honorable attitude serves as a stark contrast to the premise of the heavily debated new book of Charles Murray, Coming Apart (see New York Times review here) that argues that the economic travails of the white working class is due largely to a lapse in moral values.  What was also striking in the article was that there was no sense that the dire economic situation these people were facing was due to the fact that the economic game was stacked against them.  There was just a silent resignation that this is the way things are.  The American mythos of the self-reliant and self-made individual is a powerful metaphor that is firmly implanted in a large fraction of the population.  People will not always support policies that are in their economic interests.  This facility for self-denial is a large part of what makes us human.  How we obtained it is still an unresolved problem in evolutionary biology.

 


Follow

Get every new post delivered to your Inbox.

Join 117 other followers