Choleric Economic Man


Recessions are part of human nature, says Reserve Bank Governor Glenn Stevens [pdf]:

No country has managed to eliminate the business cycle. No country ever will, because the cycle is driven by human psychology, which finds expression in financial behaviour as well as ‘real’ behaviour. We are seemingly just made – ‘hardwired’, as some would put it – in a way that makes us prone to bouts of optimism and pessimism. Occasionally, we are prone to periods of myopic disregard for risk followed, in short order, by an almost complete unwillingness to accept risk. [p. 2]

‘Behavioural finance’ is one of the new big things in economics. It ditches the assumption of rationality but keeps the methodological individualism. 

Better explanations for booms and busts ditch the methodological individualism, and it follows from that that psychological states don’t matter so much. Rationality we can actually keep, but (1) bureaucratic rather than personal rationality, (2) embodied in a variety of fundamentally different kinds of institution, and (3) bearing in mind that ‘rationality’ does not mean ‘omniscience’ and certainly not ‘knowledge of the future’. (The last might go without saying, but the term has slipped a long way in economic theory.)

Published in: on 9 November, 2009 at 10:40 am  Leave a Comment  

The undeserving depressed

Lame op-ed in Saturday’s Sydney Morning Herald: Psychiatrist Tanveer Ahmed starts with the trope about the psychiatrisation of unhappiness and segues neatly into boilerplate about ‘welfare dependency’. Recombinatory conservatism.

Ahmed is “struck” by poor people’s “amazing uptake of mental health language”:

They skilfully weave technical psychiatric language into their reporting of symptoms. As a result, comments such as “I’m pretty sure I’m coming down with a depressive disorder” or “I think I’m developing a personality defect” are not uncommon, even from people with minimal education.

One day the chattering classes are talking harmlessly (yet self-indulgently) over their lattes about how depressed they are, and the next thing you know, baristas are overhearing and passing along this newfangled discourse to their partners in recreational drug-use, and all of a sudden even people with minimal education are presenting with the symptoms of bipolar disorder!

While the middle classes debate their happiness and psychiatry acquires a cultural prestige well beyond its powers, the poor inherit the new straitjacket of psychological language.

The straitjacket comes, you see, because all these people with minimal education are blinded by all this newfangled psycho-babble from “the possibility their actions may have played a role in their problems.” And it doesn’t end there. They have the misfortune to see a psychiatrist who lacks Ahmed’s insight into the human condition, and the papers are signed condemning them to “lives of dependence and misery” on the disability pension.

The funny thing about Ahmed’s piece is that he spends the first half assuming that “people with minimal education” have passively absorbed this psychologese from their betters and believe it themselves, and the second half not-quite-insinuating that there may be some trickery going on, because the disability pension is more generous than the dole and doesn’t make the recipient jump through so many hoops. He seems to realise that many people are rationally playing the system, and his target audience is other psychiatrists, for whom his message is that they ought to be policing those with minimal education a little better.

Some brands of pop psychology, though, are apparently better than others: he launches right into familiar refrains about the “pathological symbiosis” and cycle of welfare dependency. It’s not the meaninglessness, stress and humiliation of a cycle of crap jobs that causes mental illness, it’s the disability pension! Poverty is a state of mind!

They are hardly poor in a historical sense, for they have enough money to eat and are housed, educated and medically treated by the state. In formulating their situation, poverty in this sense is more like a psychological condition than one determined by socioeconomics.

Published in: on 17 September, 2007 at 10:09 pm  Leave a Comment