The Economic Crisis is Just So Complicated: #54,311

Andrew Gelman points us to a peculiar Bloomberg column by Reid Hastie that refers to some well-known research results from cognitive psychology with the seeming purpose of undermining efforts to hold anyone accountable for the economic crisis. The piece tells us:

"Just as we are wired to like a diet rich in fats and sugars, we have an appetite for simple, coherent narratives."

"the next time you hear a good story about why the financial recession, or any other economically significant event, was caused by a single collection of bad actors."

This is a truly bizarre juxtaposition. There is a great deal of evidence that many actors in the financial sector were at least unethical in their behavior (e.g. bond rating agencies giving investment grade ratings to issues they knew were junk), and may well have broken the law. In effect what Hastie is telling us is that we should not be concerned about this evidence and its implications for the markets and the economy because we are hard-wired to like a good story.

Sorry, but this one makes no sense. If the argument is that the bad actors in the financial sector should not be held responsible for the economic crisis, then the argument should be based on the facts and the economics. The assertion that the people who think the financial industry was responsible just have some cognition problem is pretty much just a crude ad hominem argument.

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written by fuller schmidt, May 14, 2012 11:33

Of course. It would have been almost impossible to find out if AIG had money in it's CDS margin account. How could you not trade with them then?

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written by David, May 14, 2012 1:45

As a rule of thumb, any time you see the phrase "humans are [or are not] wired to..." you can pretty much assume whatever follows is utter BS. I don't dismiss evolutionary psychology out of hand, but as a rhetorical device, it's lazy and reactionary.

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written by diesel, May 14, 2012 5:59

While it might be true that a simple narrative accusing a single actor or group of actors would be a gross simplification of complex and compound events, this does not logically preclude the notion that a core group sharing a common purpose and acting in a mutually supportive way consistently through time, wittingly or unwittingly created the conditions which precipitated the outcome, intended or not.

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written by Ziggy, May 14, 2012 6:47

Here's a simple story:

The banksters and their propaganda machine love complexity. Always and forever.

Witness the mind numbing layers of b.s. created to fuzz up Dodd-Frank.

Complexity is the mothers milk of fraud and attorney's fees.

I hope Lady Natura Selectrix
written by JHM, May 15, 2012 3:46

decides, in Her wisdom, to evolve us a novel by Hasty Reader.

Imagine four hundred pages along the lines of "The divide between human and our nearest primate cousins in causal cognition capacities is as dramatic as our advantage in language use."

Happy days.

The Economic Crisis is Just So Complicated: #54,311

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