Shiller on Fama: “maybe he has a cognitive dissonance”
Here, emphasis mine:
It must affect your thinking somehow that they really believe in markets. I think that maybe he has a cognitive dissonance. His research shows that markets are not efficient. So what do you do if you are living in the University of Chicago? It’s like being a Catholic priest and then discovering that God doesn’t exist or something, you can’t deal with that, you’ve got to somehow rationalize it.
Cross-posted at Asymptosis.
“His research shows that markets are not efficient.”
Think for a moment about what is meant by the term market. Am I wrong to suggest that a market, as the term is used in economics, is the interactive behavior of a great many different individuals and groups of individuals. Generally speaking the behavior is focused on a shared concept of a process or phenomenon that has economic characteristics. A market is generally mufti-faceted, as big as an entire major industry or any of the smaller units that make up an industry.
How on Earth can such a process be thought to be efficient when left to the devices of the multitude of players each of whom is looking for their own advantage? I know, the geniuses who adhere to this ideology will suggest that it is because of that very dynamic of the multitude pulling one way and then the other that results in efficiency. Is there any other aspect of human social life that is thought of in the same manner, that each for himself within a morass of complexity leads to the best results? i don’t think that there is any evidence in the science of human behavior that would support such an absurd idea.
Interesting metaphor Steve.
Because probably the two most important philosophical arguments for the proof of God are the very similar ‘Ontological Proof of the Existence of God’ by St. Anselm in the 12th century and Descartes in the 17th(?).
Anselm was any any reckoning one of the most brilliant men of his day, though certainly holy in the ordinary sense basically canonized for his brain. And although Descartes never got canonized no one then or since has challenged his brilliance.
And yet both felt compelled to advance their Ontological Proofs even though in the end there was never a question as to where either would come out on the question. For example while Descartes ALWAYS insisted he started from ‘Doubt’ and went to ‘Certainty’ what is NOT in doubt is that the existence of God and moreover the Catholic God was going to be an end result. And the same and even moreso with Anselm and if you want to get deep the most famous doubter of them all in St. Augustine. By the time all three got to their ultimate philosophical positions, ones that remain immensely and almost immmeasurably influential right to today there was literally zero possibility of a “Coming to Non-Jesus” moment.
Now Bertrand Russell is cited as saying about Anselm’s Proof that while it had to be wrong at times he would be walking along thinking about it and its logical force seemed overwhelming. Because whatever else you want to say about Augustine, Anselm and Descartes they weren’t just facile sophist debators, these are some of the deepest minds in recorded literature/philosophy/theology. Now I think I have identified the fallacy in the Ontological Proofs, but then again all cranks think they have the final answer, on balance I HAVE to be wrong. Still like Descartes I start with the principal ‘Dubito’.
On the other hand Descartes famously started his even more famous line of inquiry with ‘Cogito’ (‘ergo Sum’) and this was historically the basis of the kind of Positivism that underlies the thinking of the Classical Economists. I mean OF COURSE you can start from First Principles and work upwards. And so OF COURSE any problems in your solutions MUST be due to bad reasoning along the way.
Anselm and Descartes started with the basic proposition “God is by Definition Perfect”. Fama and his colleagues knowingly or not just literally substituted “Markets” for “God” in their logical calculations. I hasten to add that few of the may actually MISTAKE the two (St. Milton of Chicago aside) just that the logical structures are identical.
And on a much more elemental and gut level much the same produces the mirrored beliefs that “Communism/Conservatism/Libertarianism Cannot Fail, they Can Only Be Failed/Have Never Really Attempted.
That is like Descartes the Treasury View people will never become acknowledged Atheists to Revealed Tradition. No matter how tortured Fama’s logic proves to be.
Bruce, thanks for that. For me, the human penchant and facility for self-delusion, and the methods employed to that end, are the most fascinating subject there is.
To maintain a semblance of humility, I try to spend some time on this page at least once a month: