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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: thames_sider who wrote (92270)	10/28/2008 2:01:50 PM
From: cnyndwllr	Read Replies (3) \| Respond to of 541701

Thames, am I missing something? Greenspan and Brooks find it bizarre that: "Economic models and entire social science disciplines are premised on the assumption that people are mostly engaged in rationally calculating and maximizing their self-interest. But during this financial crisis, that way of thinking has failed spectacularly." That's just ignorant. The premise "that people are mostly engaged in rationally calculating and maximizing their self-interest" has not been undercut by this crisis, it's been reaffirmed! The DECISION MAKERS for the major investment banks absolutely calculated and maximized their self interest. Their window of opportunity was short and they looted the store, cooked the goose that laid the golden eggs and banked the profits in the form of large bonuses. Sure, the businesses are failing, investors are holding empty bags and the economy is reeling, but no one's taking the money they took for years and hoped to take for another few years. After all, all good things come to an end sometime. The true problem was that the personal finances of the decision making executives were tied to short term goals, rather than the long term health of their corporations. And their "investors" were also more interested in short term stock prices than long term investment in the company. If you want to change the long term health of the major corporations then you have to create a system where the executives of those corporations are rewarded for longer term success. If you don't then the very real fact that people will be "rationally calculating and maximizing their self-interest" will often be the undoing of the corporation's long term health. Ed

To: thames_sider who wrote (92270)	10/29/2008 4:58:59 AM
From: Cogito	Respond to of 541701

>>Taleb believes that our brains evolved to suit a world much simpler than the one we now face. His writing is idiosyncratic, but he does touch on many of the perceptual biases that distort our thinking: our tendency to see data that confirm our prejudices more vividly than data that contradict them; our tendency to overvalue recent events when anticipating future possibilities; our tendency to spin concurring facts into a single causal narrative; our tendency to applaud our own supposed skill in circumstances when we’ve actually benefited from dumb luck.<< TS - Thanks for posting that article. It's one of the most perceptive and important things I've read from Brooks. The one paragraph above speaks volumes. Of course, it's Brooks presenting Nassim Taleb's ideas, which probably explains why it's so much better than much of what Brooks does on his own. I'm struck also by the idea that instead of dealing with crises by concentrating on which action might be in our best interest, we should work more on making sure we are perceiving the situation correctly. I plan to take that to heart. It could apply in any situation. - Allen