The biggest folly of man is that he deems himself infallible. We tend to have pride in our creations, in our theories, in our science of how things operate. It is this perception of the infallibility of our creations that has led us to challenge the laws of nature in our environment. A theory is presented, explained, validated, and it transforms into a universally accepted axiom. Therefore when you ask the intellectual about anything ranging from human behaviour, to the fundamentals of universe creation, to perhaps the theory of evolution, he will mathematically deduce it.
Hence human behaviour has been decoded or thought to be decoded by mathematicians who reassure us that they have used scientific tools to predict how the human mind will react to market conditions. Naturally when mathematicians or economists give their reason and logic, the mere mortal cannot question it, since it is considered as reliable as Newtons three laws of motion.
Economic paradigms are formulated with the knowledge of the expected and not the unexpected. So, in effect most observations of economic theorists turn out in ways that weren’t anticipated, but these unexpected observations never in reality go on to change an economic paradigm.
If any of us wish to understand the recent economic debacle, or for that matter the crash of the housing bubble, or the double-dip recession, or the enormous amount of debt that has accumulated in developed countries, or the revolution that ousted the dictatorship in Egypt, there is one very simple explanation for all of this, the explanation that is summed up in the word – hubris.
Hubris according to the Merriam Webster dictionary is defined as ‘exaggerated pride or self confidence’. History has taught us a very important lesson, in the words of Stephen Jay Gould that ‘the most important scientific revolutions all include as their only common feature, the dethronement of human arrogance from one pedestal after another of previous convictions about our centrality in the cosmos.’
Unfortunately, as much as economists would have liked to believe that they were headed on a path of stability where something akin to the great depression would never come back to haunt them, their science failed them, and so did the scientifically formulated theories they made. At the end of the day, what none of them realised is that capitalism is like a struggle between individuals, a tug of war, an attempt to gain control over scarce resources. It is like boxing perhaps, or poker, a softer restrained form of private warfare.
What economists have failed to realise is that there is and can never be a final science of war. It is a struggle between two forces, where one side is up against a thinking opponent, who may anticipate, or expect certain things about us that even we might not be aware of. For instance, imagine that there is a policy and individuals can benefit if they are made privy to the model behind the policy, what will ensue as a result would be that huge amounts of capital will seek that profit. Instead of the dog wagging the tail, the tail will begin to wag the dog, and that is what has been happening in world markets.
We need to comprehend that there can never be a real predictive science for a system that may go on to change its behaviour after the modalities of the model are known to stakeholders. It was our collective belief that the system was in fact efficient which provided the necessary fuel to make it blatantly inefficient. The creation of market bubbles in the last few decades was partly a consequence of the pervading belief that no such thing would happen.
What stakeholders did not realise was that a market does not function like a rocket and economists have not studied rocket science. We repeatedly attempted to rescue bubbles, but never really made efforts to burst them. As a result of this, our financial markets turned into a stack of cards unscrupulously piled on top of each other, to build a colossal vulnerable edifice of imminent disaster.
The collective belief of humanity to possess the ability to predict the future is now tearing itself apart like a vast sinew of lies and the false belief in the might of human intelligence is now systematically eroding. By forgetting the philosophy behind capitalistic regimes, and blindly believing in a science that has collectively failed us we are in fact paving way for another dethronement of human arrogance. Let us hope, that a new scientific revolution fills in the void that will be left behind.
The writer is Sub Editor, Profit
The dethronement of human arrogance
