Behavioral Therapy

It's been a while since we've taken a run at -- or hell, bothered to read -- our old buddy Bobo, but he rarely fails to disappoint. Here he attempts to circumscribe theoretical behavior of theoretical actors in a theoretical world. It's almost charming to watch.

Markets tend toward efficiency. People respond in pretty straightforward ways to incentives. The invisible hand forms a spontaneous, dynamic order. Economic behavior can be accurately predicted through elegant models.

This view explains a lot, but not the current financial crisis — how so many people could be so stupid, incompetent and self-destructive all at once. The crisis has delivered a blow to classical economics and taken a body of psychological work that was at the edge of public policy thought and brought it front and center.

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.

Nothing like overthinking the obvious. All these airy-fairy sentiments about "market efficiency" and "rational actors" and all that shit, it all goes out the window the second the players realize that if and when they screw the pooch, they can make everyone else pay for it. If that's not incentive enough to be completely reckless and dishonest, I don't know what is.

Put more precisely, there is no disincentive to bad behavior -- worst case scenario, a couple of Bernie Madoff types lose most of their pelf, do a couple years in a tennis-court "prison", and come out and recoup a few mil in speaking fees, pretending to have come to Jeebus, à la Michael Milken. Gee, we should all be penalized so heavily for our misbehavior.

I think we're looking at an unforeseen end stage of globalization, personally. Mobilization of capital is one thing -- was the prospective strength of the globalization movement, in fact -- but where it affects America specifically is that bailout economics necessitates that the mobility of now largely nonexistent, mostly overseas capital must be preserved at the direct expense of keeping our manufacturing base outsourced.

The capital has been exposed as fictitious and baseless, yet the means of producing real capital have not been reinstituted, because it has been deemed more important to preserve the baroque pseudo-system of "producing" the fictitious version. I can't even make a lame joke about it; that is simply not the behavior of a rational market with rational actors, that's a casino. You don't have to be Adam Smith to figure that one out.

We cannot simply continue to do each other's laundry, as the saying goes, if we can no longer afford to pay for the service. For example, if, say, the New York Times finally figures out it can train a chimp to come up with Bobo's inanities, why would it continue to pay Bobo for the privilege? Why do you think Billy Kristol is going? Shit, Bill Keller could flip quarters at random street-corner crackheads and get at least as much accuracy.

I realize these people actually get paid to thumb their dicks in print, which must be pretty cool, but Christ they can be thick.