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The late Hyman Minsky's historic research on financial crises remains timeless.
June 1 -
Rather than try to make money market funds safer, David Merkel essentially wants everyone to recognize and admit and deal with the reality that they arent safe.
February 8 -
This newly discovered, expanded version of Aesop's most famous fable bears an eerie resemblance to the modern day and sheds new light on its tragic moral.
November 30 -
Designating certain companies as systemically important accomplishes nothing more than putting them into a closer relationship with the government, making the designation itself a self-fulfilling prophecy.
September 5
We must have
Following tragedies, people seem to systematically wish to be dominated by authorities, to surrender their own freedom and rob others of theirs. Why?
We always have a layer of authority-worship ready to pop out, illustrated most memorably by
Indeed, Milgram began his experiments around the time of the Nazi trials, motivated by the issues they brought up. And the appeal of authority has not faded over the past seven decades. People still "just follow orders," even when it means violating innocents. Just look at the TSA today.
Horrible as the appeal to authority is, and though it is related to the cower-to-power effect, it doesn't fully explain our tendency after crises to want to further strengthen an already centralized force.
It's not that the government commands us to give up our freedom and we acquiesce. It's worse. Many of us beg to be dominated.
This tendency to kowtow can't be merely an appeal to authority, because in the wake of tragedies Democrats do not support giving more power to Republicans, nor does the reverse occur, no matter which party is in the majority. On the contrary, devastating events tend to polarize people into supporting "their" respective parties, even if there are no meaningful differences between the major parties. So it's not simply placating whoever is in power, though that is part of it; it is about something more.
It seems to be more of an instinct to centralize, to manage the situation, to lock everybody down, to tell people what to do and how to do it so it can't happen again. This instinct is
The illusion was first documented in 1975 by psychologist Ellen Langer. The title of one of her articles explains it best: "Heads I Win, Tails It's Chance." In other words, if I win, it is because I am skillful and smart and handsome. If I lose, it is just bad luck.
Such thinking is pervasive among gamblers, though not usually successful ones. It also has strong and negative consequences in medicine: One potential problem of too many screening tests is that patients and doctors feel an irresistible urge to act, to do something, even after fallible tests that produce false positives on a consistent statistical basis.
In banking too, the Dodd-Frank laws and the regulations they will unleash over the next few decades were a knee-jerk response to the financial crisis, a response to even
Is the illusion of control bad? Sometimes it can be good, or at least fun, such as a sports fan wearing his favorite jersey to help his team win, even when watching a prerecorded game played thousands of miles away.
But research over the past few decades extending Langer's work has shown the illusion has downsides. It can impede learning and even the desire to learn, because we ignore evidence against us. It can cause us to take greater-than-justified risks. And it can cause us to continue or even escalate a failing course of action. Are those really things we want to happen to us with our health, our money, or our safety?
We can try to de-bias those who want their side of the government duopoly to gain control with a thought experiment. Ask them: in four or eight years, do you really want that evil other party controlling weapons, medicine, and money? If not, then it shouldn't be in the government's power to make that decision.
Sometimes such hypotheticals work. But sometimes they don't. The best prevention is to eliminate the option. If government didn't have the power to take away liberties, the bias to surrender would have no effect.
The little known side note to Milgram's experiment is this: Philip Zimbardo, perhaps the world's foremost expert on
You probably guessed the answer: None. Would you have done any differently if you were one of Milgram's subjects? Are you doing anything differently today?
Without the constitution to support our Constitution, the government's long, painful experiments on us will not stop. It will continue to exploit crisis after crisis to further centralize control of drugs, guns, banks, food, energy, and everything else. Instead of objecting, many of us will be begging for more.
Philip Maymin is an Assistant Professor of Finance and Risk Engineering at NYU-Polytechnic Institute.