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How monkeys mirror human irrationality - Comments

Logicel's Avatar Comment 1 by Logicel

Wow, I just read this on a stock trading blog! The connection was because we are just jerks when it comes to finances. It is always nice when I find out about an interesting researcher (never heard of Santos before).

Mon, 02 Aug 2010 16:14:27 UTC | #495131

keddaw's Avatar Comment 2 by keddaw

As a former economist I found this very interesting, and strangely intuitive.

I always thought psychology (i.e. biology) played a much stronger role in markets than we were allowed to use in our models. Those models often used 'rational economic man' so that all actors made the best decisions for themselves at all times. This appeared so out of line with what real people did that it meant the models were only useful for teaching the models.

Economic models shows us what we should do, rarely what we do do.

Mon, 02 Aug 2010 16:50:56 UTC | #495140

Carl Sai Baba's Avatar Comment 3 by Carl Sai Baba

  1. There is no particular reason why the risky option is "wrong". If the probability is 50% (not sure if that was stated, or just implied by vague descriptions), then over time it doesn't really matter whether you regularly take a certain half loss or a possible full loss. It is weird, but not clearly wrong. Maybe a big risk is wrong if someone doesn't have enough to cover that much of a loss, but it might also be right if the individual can cover that occasional loss but really enjoys the occasional win. In the most extreme case, lottery tickets are mathematically stupid, but they are cheap and some people get a thrill out of it worth much more than a dollar and therefore the weird wash-out behavior is actually the correct choice for them.

  2. Since she likes to make comments about the housing crash, she should have done a little more research on that. The problem was not entirely made up of bad individual decisions. In fact, the main problem was that the banks DID choose the safe option every time. Do you hold onto a mortgage for a large risky profit, or do you sell that mortgage to Fannie Mae for a smaller guaranteed profit? They chose the safe option millions of times, and the presentation of that weird system is what allowed them to take bigger risks while always expecting a safe option to be offered immediately.

It would be interesting to somehow create an experiment in which the monkeys' behavior could influence both the total size of the possible grape payout as well as the probability of receiving the "loss", and then see if constantly offering that guaranteed half-payout doesn't result in more reckless monkeys which eventually waste all of their grapes.

Mon, 02 Aug 2010 16:53:35 UTC | #495142

BanJoIvie's Avatar Comment 4 by BanJoIvie

Comment 3 by RightWingAtheist

There is no particular reason why the risky option is "wrong".

The point was not that one choice is inherently better than the other, but that we choose differently depending on how the choice is framed. The experiment presents exactly the same choice in both scenarios - either take a 'safe' $1500 (2 grapes) or take a risk between $0 and $2000 (1 or 3 grapes). The irrational error is evidenced by the fact that humans (and apparently capuchins) don't evaluate both scenarios equally, but factor in a percieved (but illusory) 'loss' when evaluating risk.

The problem was not entirely made up of bad individual decisions. In fact, the main problem was that the banks DID choose the safe option every time.

I think the these 2 sentences are essentially contradicting eachother. You seem NOT to be arguing agains bad decisions causing the crisis, but rather shifting the blame for just who made the bad decisions. The lessons of this research could be applied no matter who you think made the wrong choices, so your celebrated "right wing" spin is perhaps a bit misplaced here.

Updated: Mon, 02 Aug 2010 17:42:52 UTC | #495147

Wosret's Avatar Comment 5 by Wosret

Silly monkeys, irrational economics is for people.

Mon, 02 Aug 2010 17:37:04 UTC | #495149

BanJoIvie's Avatar Comment 6 by BanJoIvie

Comment Removed by Author

Mon, 02 Aug 2010 17:41:43 UTC | #495152

God fearing Atheist's Avatar Comment 7 by God fearing Atheist

It was a good talk, and an elegant experiment, but I think the comparison with the recent financial market collapse was stretching a point.

The monkeys have equal expected value in each of the four arms. Over a sufficienntly large number of experiments they would have averaged 2 grapes a token. They could either chose no variance, or a highly variable option. The difference between high expectations dashed, and medium expectations either going up or down by equal amount is interesting.

I assume the "identical results" for humans is when the experiment is run on 18-21 year old psychology majors played for dollars rather than grapes. In those experiments I suppose the students are told it is a 50%/50% coin flip, or they have to figure that out by themselves like the monkeys. The bottom line is they (eventually) know the expected value and the variance, and it does not change.

So far so good. We are as wonky as monkeys.

But, the difference in real human markets is neither the EV nor variance are known. Given the EV and variance it is easy to pick the right stock options with a computer, and probably with pencil and paper. Our intelligence and technology can overcome the problem. The catch is knowing the EV and variance!

There was an article in New Scientist about 5 years ago about software to predict the market 2 days ahead. A reader wrote in pointing out that if such software was possible, after a period all stock brokers would have a version of it (or go broke) and they would be back to the same game but instead of buying today in anticipation of tomorrow's price, they would by buying today in anticipation of the value in 3 days time.

I'm not suggesting the psychological biases shown by the primates (monkeys and psychology majors) does not play a part in real markets, it is just that I think the extra complications of unknown EV means they can't be taken too far.

The experiments on humans need to concentrate on any systematic errors in estimating future EV and/or variance. It would be fantastic if the same could be done with the monkeys, but do they have the intelligence to understand the situation?

Mon, 02 Aug 2010 19:02:57 UTC | #495164

SeanSantos's Avatar Comment 8 by SeanSantos

While I think this is interesting when applied to economics, I'd be interested in other types of human "mistake". Which cognitive biases show up? Is it possible to do something like the Wason selection task in monkeys?

I'm not at all current on the research here, but I'm curious what design features (and flaws) of the human mind are or are not present in the other apes. Would anyone recommend any resources on that?

(Oh, and I'm not closely related to Laurie, although I'd love to be as she seems nice enough.)

Mon, 02 Aug 2010 19:26:11 UTC | #495170

SeanSantos's Avatar Comment 9 by SeanSantos

Also, I'd be curious as to why this gain/loss difference evolved. Is it a by-product of something else, or useful in itself?

I could easily propose a theory. Maybe, when you have scarce resources, any loss is bad enough to doom you (so far as having successful offspring is concerned). Having half as much food as you need can be just as bad as having no food at all in the long run, so you try for no loss at all. But when you are looking at gain, a moderate gain might be "enough" for many situations, and the difference between a little and a lot might not be as important as the difference between nothing and a little.

Or something. I'm just making up something plausible, but I'd be interested in a more scholarly analysis.

Mon, 02 Aug 2010 19:32:20 UTC | #495172

Stafford Gordon's Avatar Comment 10 by Stafford Gordon

I was in debt and more or less broke for years. I recently made quite a lot of money from the sale of a London property, paid off all my debts and can now ensure that our twin daughters leave university debt free.

I've learnt my lesson, and although I'm now a long way from being impecunious, from now on I'll always minimize the risk.

Best of all, I no longer have to work, I only do so out of choice.

S G

Mon, 02 Aug 2010 21:38:03 UTC | #495194

LetsHaveAnAdventure's Avatar Comment 11 by LetsHaveAnAdventure

The epilogue to Superfreakonomics describes a similar (possibly the same) experiment. However, the epilogue describes something that wasn't mentioned in the talk. In addition to irrational economic decisions, the capuchins in this study eventually resorted to using the money for prostitution (Superfreakonomics pg 215). The overseers of the capuchin lab in this case eventually shut the study down, fearing that the introduction of money would irreparably damage their social structure.
The epilogue is only 6 pages long, and is a really fun read : )

Mon, 02 Aug 2010 21:43:37 UTC | #495196

Ohnhai's Avatar Comment 12 by Ohnhai

Something I noticed when watching this is there is also a huge gap in thinking abut this in abstract or theoretical terms and then again in 'live' terms.

When watching the vid I thought take the risk on getting the extra 1k as it costs me nothing and take the known loss of 500 as that better than potentially loosing all the monies.

Yet when my stock options took a heady dive from $36 to $5. Did I cut my losses and vest them while significantly above their vest price? No! I hung on to them hoping beyond hope that the price would turn round.... Then the options expired and I got zero.

What would be interesting is doing an experiment where subjects are tested on the theory and then tested on their application.

In other words do we tend to make the right decisions when there is nothing actually on the line and not when there is something actually at risk?

Mon, 02 Aug 2010 23:32:24 UTC | #495233

Carl Sai Baba's Avatar Comment 13 by Carl Sai Baba

Comment 4 by BanJoIvie :

Comment 3 by RightWingAtheist

There is no particular reason why the risky option is "wrong".

The point was not that one choice is inherently better than the other, but that we choose differently depending on how the choice is framed.

Do I really need to make a list of all the times she used words like "irrational", "dumb", "wrong", "error", "mistake", "not smart", and others?

Yes, it is interesting, no, she didn't prove what she keeps saying. Maybe it COULD be proven, but she didn't.

The problem was not entirely made up of bad individual decisions. In fact, the main problem was that the banks DID choose the safe option every time.

I think the these 2 sentences are essentially contradicting eachother. You seem NOT to be arguing agains bad decisions causing the crisis, but rather shifting the blame for just who made the bad decisions. The lessons of this research could be applied no matter who you think made the wrong choices, so your celebrated "right wing" spin is perhaps a bit misplaced here.

  1. Your statement is literally false. I said that something was not the entire problem, and in fact something else was the main problem. Those two things absolutely do not contradict each other. Even if I was WRONG on both, they are logically consistent.

  2. You accuse me of spin and blame-shifting, but you make no alternative statements to even offer a competing view, which would go a long way in making it sound like you know anything about it. Who am I wrongly blaming? What do you think actually did happen?

  3. This is "not the point", but still very interesting: The speaker says something very clearly multiple times, and you want to ignore it as if it is not important. I don't say a particular thing at all, and here you are telling me that I am saying it (whatever it is). Do any of your opinions not require you to either ignore or imagine other people's words?

Tue, 03 Aug 2010 02:17:41 UTC | #495262

BanJoIvie's Avatar Comment 14 by BanJoIvie

Comment 13 by RightWingAtheist

Do I really need to make a list of all the times she used words like "irrational", "dumb", "wrong", "error", "mistake", "not smart", and others?

Wow. Nice rant! Yet for all your vigour, I still think you miss the point. Your entire first point in Comment 3 took issue with the assertion that the 'risky' choice was 'wrong'. The only problem is, Laurie Santos is making no such assertion. You have misunderstood or mischaracterized her point. Yes she used all those 'bad' words, but none of them were referring to making a risky choice instead of a safe one. You are absolutely right - in her brief examples both choices provide the same result over time. It literally makes no difference which choice you make - given enough repetitions.

The "error" she is testing for comes when humans (and now monkeys) CONSISTENTLY SWITCH from safe to risky strategies (or vice versa) - despite the fact that nothing real has changed in the offered choices. That switch is an indication that we are misjudging the gain/loss presented in the choices. We "mistakenly" judge the two cases to be different (and base our actions on that mistake) when they are in fact the same. In this carefully balanced scenario, such a failure of perception makes no real difference, but in life it often does. This is a predictable human error pattern. We regularly tolerate greater risk to avoid perceived 'loss' than we do to pursue a perceived 'gain'. The 'mistake' in these specific tests lies in our faulty perceptions of loss/gain, NOT the choice per se. And yes, her results DO bear out her assertion.

  1. Your statement is literally false. I said that something was not the entire problem, and in fact something else was the main problem. Those two things absolutely do not contradict each other. Even if I was WRONG on both, they are logically consistent.

No, you said the problem was NOT caused by 'bad individual decisions'. Then you said that the main cause was that banks repeatedly made the 'safe' choice. If your claim is true, and these 'safe choices' were the cause of the financial meltdown, then it would be fair to call them a series of 'bad individual decisions'. No? I think saying "choices X, Y, and Z led to massive systemic collapse" can reasonably be interpreted as analaous to saying "choices X, Y, and Z were 'bad'". Again, I think you are conflating 'risky' with 'bad' when this presenter never made such a connection. A 'safe' choice can also be a 'bad' one if it is based on false perception or bad risk assessment.

In fairness, you also imply that the banks' individual choices were rational given what you characterized as a flawed incentive system. But if you wish to claim that these choices were collectively the 'main problem' which led to the housing crisis it is odd to simultaneously imply that each individual choice was 'good'.

Anyway, I do see that the two sentences I quoted can be made to agree, given certain interpretation, which is why I said I think they are essentially contradicting - for the reasons I have outlined.

You accuse me of spin and blame-shifting, but you make no alternative statements to even offer a competing view, which would go a long way in making it sound like you know anything about it. Who am I wrongly blaming? What do you think actually did happen?

It was not my intention to 'accuse' you of anything. I said that the thrust of your statement was to shift the blame (from 'bad individual decisions' to banks or to Fannie Mae or ultimately to government intervention depending on how one interprets your statement.) Clearly you intended this shift, and reiterated this intention in your later response. ("I said that something was not the entire problem, and in fact something else was..." - AKA shifting of blame.) I DID NOT say you WRONGLY blamed anyone. I don't wish to get into a discussion about what caused the housing crisis, or to offer some competing theory. I think that would carry us decidedly of topic. Laurie Santos' talk was not about what caused the finanicial crisis. My point was that IMHO you were dragging politics into things needlessly, and I don't wish to follow suit.

Ms. Santos' references to the financial crisis seemed aimed at lightening her presentation with some topical riffs rather than assigning blame or staking out any particular causative explanation. The only corrolary she draws between her reserch and the economic downturn is that irrationality played a role. Surely that's not much of a stretch!

I did not mean to imply anything negative with the word 'spin' - although I now realize that there are connotations associated with the word which you might take that way, for which I apologize. Perhaps 'slant' or 'POV' would have been better word choices. I merely meant to say that you have a certain political bent which you wear openly - as your handle and your comment history testifies.

  1. This is "not the point", but still very interesting: The speaker says something very clearly multiple times, and you want to ignore it as if it is not important.

No she didn't. You mischaracterized her point. See above. I did not ignore anything. I was trying to correct your misapprehension. I meant to do so civilly and politely, and I'm sorry if that didn't come through. Apparently I was unsuccessful, since you repeated and compounded your mistake in your follow up post. Before your next accusation, perhaps you should take a moment to reflect whether I have been the one to "ignore or imagine other people's words."

Peace.

Tue, 03 Aug 2010 07:40:02 UTC | #495281

Michael Gray's Avatar Comment 15 by Michael Gray

Economics = Voodoo

Tue, 03 Aug 2010 09:50:21 UTC | #495313

hungarianelephant's Avatar Comment 16 by hungarianelephant

Comment 14 by BanJoIvie :

Ms. Santos' references to the financial crisis seemed aimed at lightening her presentation with some topical riffs rather than assigning blame or staking out any particular causative explanation. The only corrolary she draws between her reserch and the economic downturn is that irrationality played a role. Surely that's not much of a stretch!

The problem here is that she is conflating individual human irrationality with systemic irrationality.

Banks, Freddie Mac etc. made a lot of decisions to extend loans on inflated property values to people without the means to repay them. Taken together, these decisions were plainly irrational. The difficulty is in singling out any one decision of any one individual within that system as being necessarily irrational. That's why it's very easy to blame someone else. No individual lemming is ever singled out for criticism.

What would be interesting is to see if the monkeys would eventually build themselves a part-faith-based economic system independently of their human handlers.

Tue, 03 Aug 2010 11:19:44 UTC | #495332

Ivan147's Avatar Comment 17 by Ivan147

Comment 9 by SeanSantos :

Also, I'd be curious as to why this gain/loss difference evolved. Is it a by-product of something else, or useful in itself? I could easily propose a theory. Maybe, when you have scarce resources, any loss is bad enough to doom you (so far as having successful offspring is concerned). Having half as much food as you need can be just as bad as having no food at all in the long run, so you try for no loss at all. But when you are looking at gain, a moderate gain might be "enough" for many situations, and the difference between a little and a lot might not be as important as the difference between nothing and a little.

Or something. I'm just making up something plausible, but I'd be interested in a more scholarly analysis.

Sean - I think that makes a lot of sense.

It is important to recognise that not all dollars are equal in that in some cases a small loss can be catastrophic whereas a small gain of equal value is simply a 'nice to have'.

Or to put it another way - if you are standing in water and your head is 6 inches above the water line a 6 inch loss is a lot more critical than a 6 inch gain is beneficial.

The key is making the correct decisions in knowing where the 'water line' or survival line is.

Perhaps in the absence of sure knowledge we tend to assume that where we are is an OK place to be (ie we are above the water line), which is not a bad working assumption as otherwise we would be already dead.

So in the $1k scenario we are minimising risk (our default condition), whereas in the $2k scenario the water line might be at $1900, so we will take a 50/50 chance of survival over a guaranteed starvation situation.

As an aside when I think of the puzzle I formulate it so that the $500 loss from the $2000 starting point I treat as a 'tax liability', then the question becomes do I want to pay the tax as due, or take a risk on tax avoidance (evasion) which carries a $500 fine and a 50% chance of being caught.

When asked in those terms would be interesing to know whether it affects peoples decision making.

Tue, 03 Aug 2010 11:47:53 UTC | #495340

BanJoIvie's Avatar Comment 18 by BanJoIvie

Comment 16 by hungarianelephant

The problem here is that she is conflating individual human irrationality with systemic irrationality.

Banks, Freddie Mac etc. made a lot of decisions to extend loans on inflated property values to people without the means to repay them. Taken together, these decisions were plainly irrational. The difficulty is in singling out any one decision of any one individual within that system as being necessarily irrational. That's why it's very easy to blame someone else. No individual lemming is ever singled out for criticism.

Of course your point is well taken, although I'm not sure Ms. Santos is really guilty of this conflation to any great degree. As I said, I think her financial crisis comments were aimed more at levity than anything else, and they were purposely vague to that end.

That being said however, even the largest, most complex human system is still made up of individuals. As only one example (I'm still not rising to the bait and don't wish to argue specific causes) take the "decisions to extend loans on inflated property values to people without the means to repay them" which you mention. These were system wide, but still a massive number of separate individual decisions. Maybe each seemed rational at the time, and perhaps, given the circumsances then, were justifiable.

Certainly there was plenty of rationale on offer. Like say, "Everyone else is doing it and I have to compete." Just as certainly there were faulty assuptions by many individuals, like "Real estate will keep inflating at historic rates without serious repercussions, and I can safely take profit indefinitely." There was talk of a "housing bubble" for years before a crisis hit, and this should have been a red flag - not only to the system as a whole, but also to each individual actor. Such massive underestimation or wholesale ignoring of risk was systemic surely, but millions of individuals colluded to create that systemic irrationality, and each shares a minute part in it. Of course that share is small enough to easily pass the blame along to others. Yet surely a great many individuals, (in all sectors from consumers to lenders to financiers to politicians) if they were being honest would now concede that - with hindsight - they personally were at least mildly irrational.

Updated: Tue, 03 Aug 2010 19:20:44 UTC | #495504

hungarianelephant's Avatar Comment 19 by hungarianelephant

Comment 18 by BanJoIvie :

Yet surely a great many individuals, (in all sectors from consumers to lenders to financiers to politicians) if they were being honest would now concede that - with hindsight - they personally were at least mildly irrational.

My personal experience is that they don't. As one who sat on the sidelines watching this insanity, I am still waiting for the slightest acknowledgement for those who castigated me over "dead money" in rent that I was right. But that's way off the point I was driving at...

If you used the monkey study's findings as your guideline, you would expect people to prefer variable rate mortgages over fixed rate (take the risk on a "loss"), which they did, but to bail out in a rising housing market, which they didn't. So it's fairly doubtful whether you can simply map one onto the other anyway.

What RWA was talking about above was the actions of the lenders, not the individuals. It was entirely rational for the lenders to act stupidly. Why? Let's look at who is involved.

The lending officer is the front line guy who approves the loan. He is told that his job is to lend lots of money to anyone who can meet the criteria. His bonus depends on that. He is going to lend no matter how foolish the criteria are.

Who sets the criteria? Some sort of risk committee. They have two main constraints. One is regulation, which mandated by law a view that loans secured on property were to be regarded as the safest kind (no matter how overvalued property might be). That is going to favour further lending. And so is the other constraint - what the CEO wants. He wants to lend more money, because his company can only make money by lending money.

Why wouldn't the CEO be too bothered about the risks of overcommitment? That's the key piece of the jigsaw. He generates his own wealth in the form of salary, bonuses, pension top-ups, share options and long term incentive plans. But "long term" here means 3 years, and the share options all vest within 5. His best financial interest is served by a rising stock price, which can be generated with steadily rising revenue numbers. And these can be manipulated in various ways, such as front-loading fees (and then lending them) and flipping mortgages to someone who puts them into packages and sells them to pension funds.

Why do the shareholders tolerate this? Well, partly because it's impossible for a shareholder to know as much about a business as the people spending 14 hours a day running it, so it's rational to entrust much of that decision making to a professional. You have to pay much like anyone else does in order to get the right professionals. And even if you don't like it, company law is set up so that there's not a whole lot you can do about it.

So everyone (on the lending side) acts rationally, but the system is irrational.

How do systems like this grow up? I would think there are several PhD theses in that.

My point is that I don't believe you can assume that systemic irrationality is the same as individual irrationality. In certain circumstances it's rational for an individual to fly a plane into a skyscraper, no matter how (collectively) insane the system that creates those decisions must be.

Wed, 04 Aug 2010 08:26:41 UTC | #495638

Carl Sai Baba's Avatar Comment 20 by Carl Sai Baba

Comment 14 by BanJoIvie :

Comment 13 by RightWingAtheist

Do I really need to make a list of all the times she used words like "irrational", "dumb", "wrong", "error", "mistake", "not smart", and others?

Your entire first point in Comment 3 took issue with the assertion that the 'risky' choice was 'wrong'. The only problem is, Laurie Santos is making no such assertion.

Yes she did. I quoted several of her exact words. She repeats these things a dozen times, and then makes jokes to back it up.

You have misunderstood or mischaracterized her point.

No I didn't. You are ignoring repeated and blatant assertions.

Something YOU are missing is that jokes aren't funny unless you believe a particular thing. Maybe you believe the same things she does, and maybe that's why you don't see what the big deal is.

Yes she used all those 'bad' words, but none of them were referring to making a risky choice instead of a safe one. You are absolutely right - in her brief examples both choices provide the same result over time. It literally makes no difference which choice you make - given enough repetitions.

If it's an "error", it's not just a quirk. Let's look at an example:

"How is a species, that's as smart as we are, capable of such bad and consistent errors?"

She isn't talking about an interesting quirk, she is saying that we consistently do wrong things.

No, you said the problem was NOT caused by 'bad individual decisions'.

I did not say that bad decisions were not made and did not contribute, I said that it wasn't "entirely" caused by that. Cutting that qualifier out of my words borders on blatant lying on your part. It becomes more difficult here to believe that you believe your own words and are not playing games on purpose.

Maybe you won't believe me unless I offer a specific example. If I said that many 4th-party banks made the bad decision of investing so heavily in housing without doing enough research into the causes of housing inflation, THEN will you stop deleting my words to convert qualified statements into absolutes?

Then you said that the main cause was that banks repeatedly made the 'safe' choice.

While I am open to anyone disagreeing on how big a portion that was, calling something the "main" problem is not the same as saying other things didn't happen. My reason for saying that it was the main cause is because most of the bad decisions wouldn't have been possible without this "safe" choice being made by someone else. It's hard to invest in mortgage-backed securities if nobody is selling them.

If your claim is true, and these 'safe choices' were the cause of the financial meltdown, then it would be fair to call them a series of 'bad individual decisions'. No?

It was the speaker's own description that taking a guaranteed $500 profit was "safe". See graphic at 11:24.

I think you are conflating 'risky' with 'bad' when this presenter never made such a connection.

Here are some things she actually DID say, following up her risk-aversion explanation for the "risky" option:

13:50... "We actually become more risky, which can be really worrying" ... "these kinds of things play out in lots of bad ways in humans"

You really have to ignore both large and small details in this video to think that she is not warning us about irrational reasons for bad risky choices.

In fairness, you also imply that the banks' individual choices were rational given what you characterized as a flawed incentive system. But if you wish to claim that these choices were collectively the 'main problem' which led to the housing crisis it is odd to simultaneously imply that each individual choice was 'good'.

I stated clearly that they were safe by the speaker's own definition, not that they were good globally. From an individual point of view, these "safe" choices appear to be good even though they add up to trouble. Nobody should make jokes as arguments or try to sound scientific on the issue without first learning that lesson because they can end up contradicting themselves otherwise.

Anyway, I do see that the two sentences I quoted can be made to agree, given certain interpretation, which is why I said I think they are essentially contradicting - for the reasons I have outlined.

It isn't a "certain interpretation", it is the literal meaning. You seem to like imagining your own meanings while ignoring the established definitions. We will probably have a disagreement on what "essential" means. It means that a thing can't exist without that quality. It does not mean some interpretation of it as imagined by the reader.

I don't wish to get into a discussion about what caused the housing crisis, or to offer some competing theory. I think that would carry us decidedly of topic. Laurie Santos' talk was not about what caused the finanicial crisis.

  1. She sure made a lot of comments about it.
  2. Even if she had never said a word about it, it would still be worth noting that her interpretation of risk and error conflicts with real problems.
  3. If you don't want to talk about causes of the housing crash, both my posts and this video are an odd subject for you to comment on.

My point was that IMHO you were dragging politics into things needlessly, and I don't wish to follow suit. Ms. Santos' references to the financial crisis seemed aimed at lightening her presentation with some topical riffs rather than assigning blame or staking out any particular causative explanation.

If you don't like "dragging politics into things needlessly", then her gratuitous jokes should bother you a lot more than my insistence on factual and logical comparisons.

The only corrolary she draws between her reserch and the economic downturn is that irrationality played a role.

Oops! Did you just conflate risk with irrationality?

I agree that she said that, though that wasn't her entire message. She also said that the risky choices were the "worrying" ones, and I disagree on both. The supposedly safe choices are what worry me, and I think it is more rational for a bank to live with the risk it creates.

Thu, 12 Aug 2010 13:51:45 UTC | #499464