What Do You Think About This?

Having had the serious part of yesterday seeing what happened in The Tour de France time trial it was time to wind down.  A Jessye Norman reference in the TV guide looked like an interesting musical item. 

Wrong again it turned out to be Jesse Norman, male, at the Hay Festival talking to Daniel Kahneman (see Wikipedia).  He is a Nobel Prize winner for his work in applying behavioural psychology to economics. 

He did a spell as a conscript in the Israeli army which would have been useful to him in his later work.  In an army there is a reason for everything which determines how you are expected to behave.  This is always irrational.

His work is extensive and complicated and arising from a basis in another discipline suggests that many essential assumptions in economics and amongst economists are untenable in practice and unworkable as any basis for policies. 

When I was told fifty odd years ago that econometrics, mathematics based economics was the certain future, I had doubts.  It is a pity that too few others did.
  
After that relaxing hour a programme on another channel caught the eye.  It was on the PBS channel from America, one of a series covering the financial meltdown of 2008.  It concentrated on the collapse of Bear Stearns, the failure of Lehmann and the bail out of AIG. 

It was entertaining to see so many of the best and brightest in Wall Street and Washington DC getting it so badly wrong.  They gave London a good run for the money in the quest for turning shambles into disasters.  Underlying the coverage was the constant question, why did they do this?

Whilst Kahneman’s work would not give the precise answers his thinking about how individuals make economic decisions, the imperatives which drive people and the force of group think offered many insights.

Now it is becoming increasing clear that the idea that the figures have been constantly fiddled big time and people led to or dragooned into believing them is not just the cynicism of the few but the reality of what has been happening.

So not only did all the governments and related authorities know little in terms of having the technical expertise of working experience in the areas of finance that went wrong, but most of the data on which they claimed to be making rational decisions was hopelessly flawed or faked.

In any case their brains were not set up for rational thinking in the first place.