“No amount of piety in his imagination and affections will harm us if we can keep it out of his will. As one of the humans has said, active habits are strengthened by repetition but passive ones are weakened. The more often he feels without acting, the less he will be able ever to act, and in the long run, the less he will be able to feel.”
C. S. Lewis, “The Screwtape Letters,” p. 71.
“The profit motive is a good thing when it operates in an environment where bad bets are punished with losses and good investments are rewarded. Only government can distort that healthy profit-and-loss system, giving people incentives to make bad decisions. And it’s in this environment that greed is no good to anyone. It turns out, however, that greed—or better, rational self-interest—can help our economy stabilize faster than government ever could. As the lubricant of our economic system, self-interest will cause a million market actors to recalibrate and to direct resources to projects that create value in our society. We the people will temper our irrational urges and mitigate our risks if government restores the rules that let profit and loss bring discipline. But if government continues to change the rules to bias the market in favor of irrational behavior, rent-seeking, and corporatism, the chaotic aspects of the system will continue to wobble out of equilibrium. Black swans will become commonplace.”
Thanks to Mike Martin for pointing out the piece.
Comment:
This is a nice piece pointing out how metaphors govern our thinking – we talk about the economy as it were a machine when it’s actually more like an eco-system. Interestingly, Tom Wolfe made a similar point about the misuse of metaphors in Freudian psychology (for eg. the term repression, as though the body were in need of an outlet to blow-off steam).
But there are at least two things I object to here.
One is – greed isn’t rational self-interest. That’s a complete confusion of terms. Gordon Gekko-like greed is anything but rational. It’s compulsive. The self has many other interests and drives besides doing down other people. Rational self-interest is the prudent self-interest of “right reason,” as the Catholics call it. A well-ordered reason. Not one that’s the slave of your drives. It’s self=governing reason which produces genuine self-interest.
And two: sigh. None of this was a black swan. Taleb himself doesn’t claim it was, either. Black swans only make sense in talking about an un-manipulated world, I would think. Taleb was talking about the way risk is modeled. He says on his website that he uses the banks in his book as an illustration and then gives some quotes in support, which, he says he wrote between 2003-2006 (the book was published April 2007).
But Felix Salmon at Portfolio.com points out that his actual comments on Fannie in an interview before they went bust were quite vague.
However, the author of this piece is spot on in the rest of this comments.
I’ll try to post my calls on this, not to prove I can predict the markets (I can’t), but to prove that we don’t have a market. We have a kind of rigged puppet show, which you can (sort of) predict, not because of any genius on your part, but because of the obviously crooked motives of of several leading actors. The only special skill you need for this is the ability to recognize propaganda.
I know I came across Fannie’s corruption when I was researching Goldman Sachs in July 2006 from the Washington Post which had a long series of excellent articles on it from 2004. So, how was this crisis unexpected?
Here’s my piece (from 2006)
“Most recently, regulators are looking into claims that Goldman (among others) helped managers at the US Federal National Mortgage Association (known as Fannie Mae) prettify their books to maximize performance bonuses at the company entrusted with keeping US home loans afloat. Which means that Goldman was center-stage not only in the credit and derivative booms, but in the housing boom too. (Goldman and the other firms deny wrongdoing.)”
My original investment report on which this article is based had much more on Fannie and I will post it here. I’m pretty sure there were plenty of prominent people in the financial world who had already decided that Fannie was going to go bust. In fact, I think a lot of people had taken short positions on it. I’m not sure how on that basis you could argue this crisis was a Black Swan.
Thanks to Leslie Marsh of Sussex University for a video at his highly-recommended site, manwithoutqualities, for this passage by neuroscientist V. S. Ramachandra, Mirror Neurons and The Brain In the Vat:
“Iaccomo Rizzolati and Vittorio Gallasse discovered mirror neurons. They found that neurons in the ventral premotor area of macaque monkeys will fire anytime a monkey performs a complex action such as reaching for a peanut, pulling a lever, pushing a door, etc. (different neurons fire for different actions). Most of these neurons control motor skill (originally discovered by Vernon Mountcastle in the 60’s), but a subset of them, the Italians found, will fire even when the monkey watches another monkey perform the same action. In essence, the neuron is part of a network that allows you to see the world “from the other persons point of view,” hence the name “mirror neuron.”……….Dissolving the “self vs. other” barrier is the basis of many ethical systems, especially eastern philosophical and mystical traditions. This research implies that mirror neurons can be used to provide rational rather than religious grounds for ethics (although we must be careful not to commit the is/ought fallacy)……
Intriguingly, in 2000, Eric Altschuller, Jamie Pineda and I were able to show (using EEG recordings) that autistic children lack the mirror neuron system……
Mirror neurons also deal a deathblow to the “nature vs. nurture ” debate (I like Matt Ridley’s suggested replacement “Nature via Nurture”) for it shows how human nature depends crucially on learnability that is partly facilitated by these very circuits. They are also an effective antidote to sociobiology and pop evolutionary psychology; the assertion that the human brain is a bundle of instincts selected and fine-tuned by natural selection when our ape-like ancestors roamed the savannahs…… But, the notion that human talents and follies are governed mainly by instincts hard-wired by genes is ludicrous.
Thanks to mirror neurons the human brain became specialized for culture, it became the organ of cultural diversity par excellence. It is for this reason (rather than moral reasons or political correctness) that we need to cherish and celebrate cultural diversity. To be culturally diverse is to be human…..
I will conclude with a metaphysical question that cannot be answered by science. I cannot decide whether the question is utterly trivial or profound. I call it the “vantage point” problem foreshadowed by the Upanishads, ancient Indian philosophical texts composed in the second millennium BC, and by Erwin Schrödinger. I am referring to the fundamental asymmetry in the universe between the “subjective” private worldview vs. the objective world of physics………
…… It’s a fair assumption that the identity of your conscious experience (including your “I”) depends on the information content of your brain, “software” representing millions of years of accumulated evolutionary wisdom, your cultural milieu, and your personal memories; not on the particular atoms that currently constitute your brain…… [Lila: atoms that are replaced regularly]
Now imagine speeding up this replacement process so that I destroy your present brain and replace it with a replica/simulacrum with identical information. There would be no reason to believe your conscious experience would not continue in that other brain…..
….The possibility of multiple “minds” in a single brain is not as bizarre as it sounds. It often happens in dreams. I remember having a dream once in which another guy told me a joke and I laughed heartily even though the “other guy” was my mental invention, so I must have already known the joke all along!
The question of whether “you” would continue in multiple parallel brain vats raises issues that come perilously close to the theological notion of souls, but I see no simple way out of the conundrum. Perhaps we need to remain open to the Upanishadic doctrine that the ordinary rules of numerosity and arithmetic, of “one vs. many”, or indeed of two-valued, binary yes/no logic, simply doesn’t apply to minds — the very notion of a separate “you ” or “I” is an illusion, like the passage of time itself.
We are all merely many reflections in a hall of mirrors of a single cosmic reality (Brahman or “paramatman”). If you find all this too much to swallow just consider the that as you grow older and memories start to fade you may have less in common with, and be less “informationally coupled”, to your own youthful self, the chap you once were, than with someone who is now your close personal friend. This is especially true if you consider the barrier-dissolving nature of mirror neurons. There is certain grandeur in this view of life, this enlarged conception of reality, for it is the closest that we humans can come to taking a sip from the well of immortality….
Will you choose the vat or the real you? This exercise might not provide an obvious answer, but fortunately none in this generation or the next will have to confront this choice. For those in the future who are forced to answer, I hope they make the “right” choice, whatever “right” means….”
NB: Again, apologies for a bit of splicing and reduction of the original passage in the interests of clarity. No meaning is altered by it, and the original is easily compared from the link.
“Early zoologists classified as mammals those that suckle their young and as reptiles those that lay eggs. Then a duck-billed platypus was discovered in Australia….
The platypus isn’t doing anything paradoxical at all. It isn’t having any problems. Platypi have been laying eggs and suckling their young for millions of years before there were any zoologists to come along and declare it illegal…
Quality is in the same situation as that platypus.
Because they can’t classify it the experts have claimed there is something wrong with it….
Should reality be something that only a handful of the world’s most advanced physicists understand? ”
That’s Robert Pirsig in “Lila,”
Update: I thought I should add this to make it clear what Pirsig was trying to do. It’s from an Amazon reviewer, Ralph Blumenau, who, from his profile is a retired teacher (his students were lucky – the review is spot on).
“He had felt that the two modes of western thinking, the classical and the romantic, were both unsatisfactory. The romantic, which will not come to grips with the underlying meaning of phenomena, is basically superficial. The classical mode, with its analytical procedures, often destroys what it investigates. The romantic mode stresses the subjective impact on the observer; the classical stresses the objective nature of the things observed. Both are part of what, in Lila, Phaedrus calls the subject-object metaphysic; and the concept that the world can be understood in terms simply of subject and object has been deeply embedded in western thought ever since classical Greek philosophy. However, the pre-classical Greeks, through their concept of arete, held out the possibility of a richer understanding. Phaedrus translates arete as “Quality” (and sometimes as “Value”), and it is by Quality that the conclusions reached by the classical or the romantic processes need to be judged.”
“John McMurtry writes that the first rule of the “Group-Mind” is that it cannot adopt itself as an object of critical reflection:
“When the most self-evident line of thought has been blinkered out across a people, only an a priori thought system can account for it. As with other great problems of our era, the group-mind disconnects by stopping thought before it arises.”
Christian ascesis is the practice of giving attention to thoughts as they first appear, thus it is a practice wholly at odds with a priorism and with all forms of mechanical, psychic or associative activity which masquerades as “thought.” According to Father Sylvan, a hundred, a thousand times a day, thoughts that challenge or contradict assumptions and beliefs, thoughts that might provoke self-questioning or discomfort about some fact or emotion or received wisdom, thoughts that might force one to confront one’s own laziness, anger, lack of love, lack of integrity — such thoughts are continually circling the perimeter of the mind and sometimes even penetrate its arena. And yet they come to nothing, they are quickly repelled, conveniently forgotten, dispersed, and covered over by compulsive action, rationalization, explanation, or emotional reaction. Father Sylvan calls this incessant activity of covering over the Question the “First Dispersal of the Soul.” It means that the force of attention is wasted, degraded by absorption into one part or another of the psycho-physical organism, and rendered useless for the growth of the soul. Man becomes trapped in an “automatism of non-redemptive experience,” which he likens to
The struggle of Christian ascesis is to contain the energy of the Question within oneself so that the Soul can come into being. Thus, the existence of the Soul is not a given, not an a priori assumption. It is an energy formed through the confrontation with question and contradiction, an energy that has to be sought, recognized, collected and accumulated – “pondered in the heart.” This is why “God can only speak to the soul,” according to Father Sylvan, “and only when the soul exists.”
Comment:
This is a fascinating post. The teaching of Philokalia is not different from that of Raja Yoga texts, or, for that matter, from the writings of Jiddu Krishnamurthi, if you put aside the doctrinal content and focus on the psychological observation. Thoughts that arise in the mind involuntarily seem to correspond to the samskaras of Hinduism and Buddhism, those predispositions and unconscious impulses which attract us to the situations in which karma (fate, moira) plays out.
What has all this to do with politics and the markets?
Much….
i) Being “embodied minds,” the nature of our thinking alters what we perceive – both in the past and in the present. That alteration in perception allows us to strategize action, anticipate problems, and to form coalitions, none of which we would be able to do if we remained obsessed with rigid mental constructs.
ii) Self-awareness of our own internal contradictions permits us to be more generous in our assessments of our antagonists and cures us of the rancid self-righteousness and inflamed dogmatism with which we approach every issue….That, in turn, gives our opponents space to rethink their own self-righteousness…..and draws thoughful people out of neutrality…
“Research by Dr G. David Batty and colleagues at the University of Glasgow, published in the American Journal of Public Health, compared the mental ability scores of 8,170 British boys and girls at the age of 10 with their alcohol intake and any alcohol problems when they were 30.Whereas most of the clever children grew up to drink as most people do, reasonably and moderately, the likelihood of developing a drinking problem if one were unusually bright increased 1.38 times in women and 1.17 times in men. …”
Hat tip to Lew Rockwell.
And more research vindicating the premise of “Mobs, Messiahs, and Markets,” from the Journal of Evolutionary Psychology.
“Darwin was initially puzzled by costly traits such as peacock tails that could not be
accounted for by survival advantage; he later concluded that these were features that led to
reproductive advantage (1871). For humans, male displays of wealth may literally be a
costly signal analogue to the peacock’s tail (Miller and Todd, 1998). Displays of
prestigious consumer goods could be an honest signal of male mate value, as they would
indicate available resources as well as skills at acquiring wealth (Colarelli and Dettman,
2003). Veblen (1899/1953) remarked on the relationship between prestige and the
consumption of consumer goods and even suggested that inherited psychological
mechanisms were responsible for this relationship. Colarelli and Dettman (2003) note that
advertisers are well aware of the importance of prestige when marketing products, and will
try to associate a product with prestige even when there is no functional relationship. An
ethnographic study of Amazonian foragers and slash-and-burn farmers found that those
who had greater monetary resources allocated a greater portion of expenditures towards
luxury goods, and this tendency was stronger in men than in women (Godoy et al., 2007).
Male displays of wealth and social status may facilitate mating competition. During
ancestral times, men with greater resource control married younger women, married more
women, and produced offspring earlier (Low, 1998). Males who did not have substantial
resources or status may have been unable to establish long-term relationships. Across a
wide variety of societies, male reproductive success is a function of social and economic
status (Hopcroft, 2006). Even in current foraging societies that are relatively egalitarian,
men with higher status have more mating opportunities (Chagnon, 1992; Hill and Hurtado,
1996).
Several laboratory studies have demonstrated that situational primes making mating
effort salient can induce male intentions to increase economic power as well as allocate
financial resources to conspicuous products. Roney (2003) found that men reported
stronger ambition and desire to earn money when in the presence of attractive women. This
effect was even seen when the men simply viewed photographs of attractive women. In
another study, men who were shown photographs of attractive women had intentions to
allocate more money to conspicuous products, but not inconspicuous products
(Griskevicius et al., 2007). Neither men who viewed photographs of unattractive women,
nor women who viewed photographs of attractive or unattractive men exhibited this
pattern. In a third study, men who viewed photographs of attractive women discounted the
future more so when choosing between small monetary rewards than men who viewed
unattractive women or women who viewed pictures of men (Wilson and Daly, 2004)….”
Comment:
Marketers target our basic drives, where we tend to act with the crowd. For example, some middle class Americans try to buy the “lifestyles of the rich and famous” in response to aggressive marketing by realtors and bankers.
But once the rise in price begins, even those who’ve adopted a more individual and rational approach are compelled to buy or rish being priced out of the market. In the Indian farming crisis, as well, farmers were lured to buy expensive seeds by very aggressive marketing that played on religious sentiment and dazzled them with the prospect of extraordinary gains. (Link to follow).
One of the things I want to explore is to whether and how libertarian language (about “free choice” and “free speech”) needs to take into account these complexities.
“USDCHF – Recent US Dollar/Swiss Franc price action is a testament to the effectiveness of Speculative Sentiment Index-based currency forecasts. Forex trading crowds had remained heavily net-short the USD/CHF since July, and the pair went on to mount an impressive multi-month rally. Most recently, that same crowd capitulated and actually went net-long the USD/CHF near the 1.2000 mark. The US Dollar subsequently went on to post its biggest monthly loss against the Swiss Franc in history—incredible by any standards. Looking to very short-term trading, the crowd is currently net-short the pair, with short positions outnumbering longs by 1.08 to 1. Such a flip gives us reason to look for a reversal, but a sharp drop in open interest gives us little conviction in our forecast. Our forex trading signals previously went short the USD/CHF for sizeable profits, but the strategies now hold a weaker bias….”
Comment:
This was quite a move up for the Franc and it shows why trading currencies in a regular (non-trading) account is hard to do.
I had planned to buy Swissie at the end of last week and then decided that the dip in the dollar from 86 – 83 on the Dollar Index had already priced in a Fed cut. So I held off, waiting to do it on Monday.
Then came Madoff. And on Tuesday, a Fed rate cut that was historic.
And as a result, from Monday to Wednesday, the dollar lost more than half the gains it made this fall. The Swissie shot up. A great trade on Friday looked almost risky by Wednesday. What if the Swissie fell back after that surge? Trader sentiment switched to shorting the dollar.
As if to confuse sentiment again, at Thursday close, the dollar had recovered some of its footing against the majors.
In Forex, trying to look for a bottom (as I was trying to do with the Swissie) takes just a little too much time for action that quick. Crowd sentiment out there is as volatile as it could possibly be.
Now the crucial thing is if GLD (the ETF, as a proxy for the spot price) can hold above 850 and the dollar over 80 by Friday close. If they do, a trend reversal of the pair will be confirmed technically.
Note: I am talking about GLD and the dollar as inversely correlated, once again. They had decoupled for a while but have returned to their inverse relationship recently.I don’t know how long that will last though. Not very long, I suspect. Notice that GLD is moving out of synch with other commodities. Oil, for instance, is down at 41/2 year lows. GLD’s move, in step with the Swissie, typified a rush to safety.
I’d hate to think the Powers That Be have so little to occupy their minds that they might actually waste time censoring my site.
So, let me put down to the Whims of the Web, such things as broken links, comments that vanish….and the mysterious problem I’ve had with my old free wordpress site, lilarajiva.wordpress.com, showing up at the top of google searches of my name, but not this one.
Some algorithm or other?
But today. I really am beginning to wonder. I did a search with Altavista and Yahoo and sure enough, this site appears at the very top as lilarajiva.com.
Hmmm. What is going on? And what to do about it? The old site is one I can’t access and free wordpress blogs can’t be redirected.
A welcome antidote to the magical thinking of many New Age gurus from writer Ken Wilber:
“The New Thought schools, of which Christian Science is the most famous, mistake the correct notion “Godhead creates all,” with the notion, “Since I am one with God, I create all.”
This position makes two mistakes, I believe, which both Emerson and Thoreau would have strongly disagreed with. One, that God is an intervening parent for the universe, instead of its impartial Reality or Suchness or Condition. And two, that your ego is one with that parent God, and therefore can intervene and order the universe around. I have found no support for that notion in the mystical traditions at all.
Advocates of the new age themselves claim that they are basing this idea on the principle of karma, which says that your present life circumstances are the results of thought and actions from a previous lifetime. According to Hinduism and Buddhism, that is partially true. But even if it were totally true, which it isn’t, the newagers have, I believe, overlooked one crucial fact: According to these traditions, your present circumstances are the results of thoughts and actions from a previous life, and your present thoughts and actions will affect, not your present life, but your next life, you next incarnation. The Buddhists say that in your present life you are simply reading a book that you wrote in the previous life, and what you are doing now will not come to fruition until your next life. In neither case does your present thought create your present reality.
Now I personally don’t happen to believe that particular view of karma. It’s a rather primitive notion subsequently refined (and largely abandoned) by the higher schools of Buddhism, where it was recognized that not everything that happens to you is the result of your own past actions. …
And so where does that notion itself come from? Here I am going to part ways with Treya and spin out my own pet theories on the people that hold these beliefs. I am not going to relate compassionately to the suffering these notions cause. I am going to try to pigeonhole them, categorize them, spin theories about them, because I think the ideas are dangerous and need to be pigeonholed, if for no other reason than to prevent further suffering. And my comments are not addressed to the large number of people who believe these ideas in a rather innocent and naive and harmless way. I have in mind more the national leaders of this movement, individuals who give seminars on creating your own reality; who give workshops that teach, for example, that cancer is caused solely by resentment, who teach that poverty is your own doing and oppression something you brought on yourself. These are perhaps well-intentioned but nonetheless dangerous people, who in my opinion, because they divert attention away from the real levels – physical, environmental, legal, moral, and socio-economic, for example – where so much work desperately needs to be done.
In my opinion, these beliefs – particularly the belief that you create your own reality – are level two beliefs. They have all the hallmarks of the infantile and magical worldview of the narcissistic personality disorder, including grandiosity, omnipotence, and narcissism. The idea that thoughts don’t influence reality but create reality is the direct result, in my opinion, of the incomplete differentiation of the ego boundary that so defines level two. Thoughts and objects aren’t clearly separated, and thus to manipulate the thought is to omnipotently and magically manipulate the object.
I believe that the hyper-individualistic culture in America, which reached its zenith in the “me decade”, fostered regression to magical and narcissistic levels. I believe (with Robert Bellah and Dick Anthony) that the breakdown of more socially cohesive structures turned individuals back on their own resources, and this also helped reactivate narcissistic tendencies. And I believe, with clinical psychologists, that lurking right beneath the surface of narcissism is rage, particularly but not solely expressed in the belief: “I don’t want to hurt you, I love you; but disagree with me and you will get an illness that will kill you. Agree with me, agree that you can create your own reality, and you will get better, you will live.” This has no basis in the world’s great mystical traditions; it has it basis in narcissistic and borderline pathology….”
Comment:
I posted this quote just after the quote I posted from Deepak Chopra, one of the most popular dispensers of New Age thought. I think it provides a corrective to some aspects of that thought. It’s not that I dislike Chopra or his brand of popular Hinduism. I don’t….at least, what I’ve read of it, which isn’t all that much. I think it has its uses. And apparently, millions of people agree with me on that. I also don’t think his comments about terrorism to CNN in November – which provoked a sharp reaction from Dorothy Rabinowitz of the Wall Street Journal – are as off-base as she writes. They aren’t. He probably knows more about terrorism in India than she does.
But there is a tendency in a lot of New Age thought – one that gets amplified by the narcissism and consumerism of mass culture – to relate everything to the “inner” world of the self (the model of the self as “inside” and apart from its relation to the material world… and to others… is itself problematic). This tendency to dismiss logic, rationality, and the sheer materiality of life; to refuse harsh emotions, physical facts, and the intractability of things – this is problematic.
I’ve written elsewhere on the dangers of magical thinking. Here, for example, is a piece I did on Ward Churchill’s description of 9-11 as “roosting chickens.” It’s an interesting read, today, after the latest wave of terrorism in Mumbai.
In any case, here is the rest of Wilber’s critique in “Grace and Grit.”
(Note: I only know one book of Wilber’s – “Spectrum of Consciousness.” I thought its synthesis of elements from different religions tended to gloss over differences, in an effort to systematize, although it was fairly interesting and useful in other respects. It’s actually been some time since I read it, though, so perhaps I am doing it an injustice. It’s not the kind of thing I like to read any more. I prefer books that are more experiential, biological, and/or psychological.
Right now, in fact, I read a lot of peak performance literature.