Monday, March 1, 2010

Economists in denial

John Cassidy describe in the New Yorker (“After the Blowup”) the inability of some Chicago school economists to acknowledge that the current financial mess has exposed the catastrophic inefficiency of financial markets. One of them, Eugene Fama, maintains that financial markets have behaved exactly as predicted by the Efficient-Market Hypothesis he still champions. Such unyielding mental rigidity is a clear sign of severe left-hemisphere deficits, a condition which has become almost a job requirement for high-flying economists who must master mind-boggling mathematical equilibristics if they want to receive professional acclaim, or even a Ph.D. Here is an excerpt from Iain McGilchrist’s piece in the Wall Street Journal (“The Battle of the Brain”) pitching the main ideas of his new book on the effects of brain lateralization: “The left hemisphere has evolved to help us use the world to achieve our ends. But it is a specialist in denial. After a right hemisphere stroke, subjects will often flatly deny that anything is wrong, even when attention is drawn to the fact that half of their body may lie there useless. Or they may say it belongs to someone else, the guy in the next bed. The left hemisphere, ever optimistic, is like a sleepwalker whistling a happy tune as it ambles towards the abyss. Let's wake up before we free-fall into the void.” The trouble is, nerds suffering from the undiagnosed syndrome McGilchrist describes can never acknowledge there is something wrong with the way they analyze causally this or that “system.” If they could at least be taken off the pedestal from which they have for decades dispensed allegedly scientific expertise on the most efficient models of social and economic organization. In any case, these are the kind of links between seemingly unrelated issues (in this case, a theoretical debate in economics and findings in neuroscience) that I would like some of my students to make.