Sunday, November 2, 2008

NYT article discussing groupthink in mortgage crisis

Here is the link.

1 comment:

  1. Of particular interest to me was the author's invocation of behavioral economics. Prominent economists, principally the one my roommate works for here in town, create policy under a basic and what I perceive to be a flawed assumption: that humans are rational beings. I am certain that from time to time, even myself included, we strive to make rational choices, but any student of history can tell you that our human story has been anything but a rational one. Yet, developing economic policy purely around incentives and rational choice, came to define supply side Reagan era,
    I think any investigation of the Reagan, small government, supply-side era, invokes some interesting points about leadership because like the economic theory, Reagan's leadership theory may point to the same assumption: that humans are rational beings.
    Reagan once said, "Government is not the solution to the problem, it is the problem." Reagan's small government philosophy operated under the fact that you (the rational individual) and the rationally- based market, could make better decisions than the complex system we call our government. In such a world there are good choices and bad, there is black and white, good and evil. With divisions this clear, government is able to play a minimal role by allowing an inherently rational populace self-regulate.
    So where would leadership fit in, inside this an idealized version of Reagan's city on the hill? If people do not need to be "led" in the direction of popular choices, it would be natural that the leader simply play the role of communicator. Not the creator or decider, but rather the identifier of choices to be made by rational citizens. A role that undoubtedly suited Reagan quite well. Rational followers would in essence need limited intrusion from leaders or leadership structures to pursue their own rational self-interest.
    Although in reality the Reagan presidency is somewhat removed from this idealized interpretation, the underlying perceptions of how people should interact with leadership resonate quite well. Leadership is limited to the communication of values, that helps to define rationality by creating a community based on certain needs and wants (liberty, prosperity, security etc...).
    The problems with this are immense, particularity for a country as heterogenous as the the United States and for a being as complex as man or woman. Despite all being Americans, we all need and want different things, and true american values (you know, democracy, freedom, liberty, equality) dictate shades of gray as opposed to black and white by design. If we are all as rational as Reagan and economists want us to be, then the need for government wouldn't have existed in the first place. The loved and hated, often inefficient leviathan we call government has a complex conscience that reflects the complexity of man and women themselves. I suppose the beauty is that in this sense, like us, our government can be inspired by powerful and effective leaders to do great things.


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