Optimism Bias,

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November 18, 2012 at 8:21 am #6431

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November 18, 2012 at 9:27 am #6432

John Day

I lost my optimism in the 1970s, and wondered what was going on in the 1980s, and just had nose to grindstone from mid 1980s on, but I’ve been seeing visions of a crash of global proportions for a decade, and I’m stocking a lifeboat now.
Sigh…
I hope there’s time.

November 18, 2012 at 9:39 am #6433

Raúl Ilargi Meijer

“I lost my optimism in the 1970s”

You didn’t really, just part of it.

“I hope there’s time.”

The very words you’ll find when you look up “Optimism Bias” in the dictionary.

November 18, 2012 at 8:00 pm #6434

John Day

I’m packing a shipping container over Thanksgiving weekend.
Perhaps I have vicarious optimism bias for my 4 adult offspring, who are all veteran bicycle-tourists and have backpacked through the Himalayas and Laotian jungle, and so on.
I’m not sure that I should actually hope for the survival of our species, which has been fitting flint blades to spears for over half a million years to kill more effectively.
Gail Tverberg at The Oil Drum has this graph of oil production growth curve-fits. It looks like terminal decline is next, and I’ll expect Seneca’s Cliff.
http://www.theoildrum.com/node/9622#more
I do hope there is time to make this lifeboat, but not expecting to have it made before TSHTF, just during the next 7 years or so.
Sigh…

November 18, 2012 at 9:55 pm #6435

charlie1935

one of your better ones ilargi;; I’ll be sending a link to it to some people whom I think need to read it in the worst way. Just not sure what their reaction will be.

November 19, 2012 at 12:39 am #6436

jal

@ jd
Gail has put out a good analysis for the novice.

The obvious is being stated.
One day we will run out of cheap energy.
Its going to cost more.
Local alternatives will help to extend some level of our present system.
Changes are coming and should be in everyones plans.

What she ignored to mention, (of which I’m sure that she is aware), was the criminal role that bankers played with leverage and outright theft of all kinds, that resulted in our financial crisis and world wide social awareness and displeasure with the status quo.

Since you are not running for election and therefore, must sugarcoat everything, then prepare for changes, (which you are doing).

November 19, 2012 at 3:15 am #6437

william

I find a mixed message within autoearth. One article deflation and devalue. Next comments about collapse and inflating prices.

I can see the scenario for either.

Someone should do an article on what the shortages will look like. For instants a shortage of oil will be a curious thing. Industry will stop short of production at a loss. Refineries have a different problem. Once processed oil has a shelf life. Like an assembly line consumption must continue. When less consumers are able to purchase and surpluses arise problems start. Oil tankers must still make deliveries, drivers need their pay cheques too. Even the refinery must keep production at a minimum level for a consistent product. Barring that the refinery will shut down. Restarting takes a long time once the whole process has completely shut down.

Here is my prediction.

First prices will fluctuate strongly (mostly downward) to control volume. Consumption must be maintained at a certain level despite the economy. Second should prices be a little on the low side we should expect shortages. This has happened in Toronto, prices didn’t skyrocket pumps went dry. Unlike the 70′s we don’t seem to be in a competitive market and prices didn’t follow supply.

Once this happens and it can be seen to be occurring well into the future then we have the problem. The problem is policy makers. Once they get involved it is anybodies guess.

I have seen local disasters and can tell you first hand when flood waters move in and the community as a whole are threatened its a complete game changer. The military moves in and takes control of everything. Farms with dikes get taken over and removed to reinforce the larger community. Likewise any pumps are removed and put to use for the greater good of the community. Interesting how quickly socialism is embraced and any capitalist venture is then called price gouging. For what ever reason there was little complaint.

November 19, 2012 at 3:49 am #6438

Raúl Ilargi Meijer

“I find a mixed message within autoearth. One article deflation and devalue. Next comments about collapse and inflating prices.”

That’s new to me.

November 19, 2012 at 4:17 am #6439

Nassim

Here is another article where the author refers to this phenomenon in an oblique way:

http://www.theoildrum.com/node/9630

November 19, 2012 at 6:00 am #6440

jal

What she ignored to mention, (of which I’m sure that she is aware), was the criminal role that bankers played with leverage and outright theft of all kinds, that resulted in our financial crisis and world wide social awareness and displeasure with the status quo.

Here is a long dissertation that is worth reading.
(It happens to agrees with TAE)

http://www.zerohedge.com/news/2012-11-18/europes-depression-japans-disaster-and-worlds-debt-prison

Is it possible that we are waiting for the world to conform to our worldview once again, but that it would be smarter to adjust our worldview to conform to the world?

November 19, 2012 at 8:45 am #6441

John Day

Thanks for the replies.
Yes, there’s more complexity at work than that one graph can show, but all complex systems seem to conform to Seneca’s ancient observation of gradual arising and abrupt collapse.
“Interesting times” we face, if history rhymes, as it usually does.
:-)

November 19, 2012 at 3:01 pm #6442

backwardsevolution

Ilargi – brilliant piece, so true. Thank you.

“Why we don’t teach Freud throughout all our school systems, all the time, is a far deeper mystery than any of us alive today care to ponder.”

Yes! I have said this very statement many times over. If we only knew and understood our biggest enemy (ourselves), we just might have a chance against everyone else. When I look at what my children learn in school, what’s considered important, I often wonder what good it will do them if they don’t understand themselves.

We prefer the big “lie” because in our minds it keeps us safe and secure. The group hammers this “truth” into our minds, and pummels any nail that sticks out. It takes a hero who is unafraid of the group’s reaction to break free.

November 19, 2012 at 3:16 pm #6443

Viscount St. Albans

Delicious. May I have a second helping of this dish?

November 19, 2012 at 8:15 pm #6444

Adam Goodwin

Why Freud? Why not Jung, instead? I think choosing one psychoanalyst over another is quite arbitrary. Was the selection of Freud made because he happens to fit your preconceived ideas about how humans work?

Just because AE has been accurate with how the financial sector works doesn’t mean you automatically have intellectual purchase in the realm of human psychology. Have you read Marcuse’s critique of Freud in Eros and Civilization. You don’t have to agree with his points, but have you at least read the critique? Have you considered Jung’s critique of Freud? It could be argued that it’s because of the social control powers of money–and materialism, itself–that we suppress who we are. Jung wrote that hierarchy, especially the state, repressed the inevitable process of individuation in a mature adult. The process of individuation, where the unconscious is brought together with the conscious mind into a concurrent whole, is underlined by symbolism; hence, the popularity of dream analysis that Jungian analysis inspired.

If we really want to delve into psychoanalysis, then perhaps we ought to take account of the symbols that permeate our life. This is what this ‘financial crisis’ is really about, right? It symbolizes the breakdown of our trust we have in each other since we have channeled that trust via a material world that has finite limits. That’s why spirituality was so important to Jung–the universe of ideas, of possibilities of relating to each other, is infinite.

November 19, 2012 at 9:49 pm #6445

g-minor

Neither Freud nor Jung had a clue about how the brain works. Both were steeped in 19th Century romantic notions of individualism, invented theologies of mind and consciousness and tried to pass them off as science inflected with poetry. Psychologists are just coming around now to recognizing the physical, material facts about what goes on in our heads. Freud and Jung were just telling stories. They may have helped to make us aware of the limitations of what we call our conscious minds (sic) but they didn’t understand that our perceptions of ourselves and others don’t necessarily correspond with what is going on there, and that DNA runs the show with a single-minded agenda of its own.

November 19, 2012 at 10:27 pm #6446

jal

In conclusion, (long discussion deleted), Those people who had an insight into an aspect of what goes on in our heads were involved in the financial meltdown and made a fortune.

If all the actors in the financial market “knew” what goes on in our heads there would not exist a stock market that can be “gamed”.

November 19, 2012 at 10:30 pm #6447

davefairtex

I believe in the optimism bias for sure. I would claim that optimism is a valuable survival trait. The optimists continue putting in effort in spite of what looks like (and what may in fact be) certain doom. The pessimists just curl up to die. After all, why bother to expend energy when there is just no point?

Yet as Ilargi pointed out, the folks in charge have taken advantage of this built-in bias to provide cover for financing a state-led bailout of the German & French banks (i.e. the “Greek Bailout Plan”). The super-corrupt elites in Greece go along, because this lets them continue to feed at the trough for a little while longer – meanwhile they ship their valuables overseas because they know this cannot last, while cutting the “surplus” available to the society at large as ordered by the IMF/EU. And euro society buys this because they, like Fox Mulder, want to believe because of the built in optimism bias.

It is a tough call. We need to maintain our optimism through these times because a positive attitude is critical to maintaining both motivation and good health, and at the same time remain clear-eyed in order to see through the lies embedded in unsustainable policies. How does one do this without turning pessimist/fatalist? That’s the trick, isn’t it?

November 19, 2012 at 11:50 pm #6448

SteveB

davefairtex post=6152 wrote: The pessimists just curl up to die.

Is that true?

davefairtex post=6152 wrote: We need to maintain our optimism through these times because a positive attitude is critical to maintaining both motivation and good health, and at the same time remain clear-eyed in order to see through the lies embedded in unsustainable policies. How does one do this without turning pessimist/fatalist? That’s the trick, isn’t it?

I do it by questioning my thinking (and that of others as they express it–see above).

I’m reading Risk Intelligence: How to Live with Uncertainty, by Dylan Evans, and he offers a helpful discussion of optimism bias and related pitfalls. One interesting bit of info he shares is that depressed people are often more objective, but, paradoxically, their optimism bias can be high (due to their baseline being so low).

Optimism without bias isn’t pessimism, Dave, it’s just optimism–false dichotomies are another “gotcha”. :-)

November 19, 2012 at 11:56 pm #6449

Glennda

Optimism about ones community is essential to my efforts. I’ve been collecting articles about the Localization of Food, Urban Farms, and Occupy-the-Farm (UC Berkeley has been using this land for GMO funded projects).

One of my favorite articles right now is about the use of Chinese brake ferns to suck the contamination of arsenic out of the soil and into its fronds. The remediation of urban soil is a high priority as we work towards urban farms. The example of Havana Cuba after its loss of Soviet aid, had them plant the city and it now provides about 70% of its farm needs, so they say.

My optimism is about the Transition to greater urban sustainability. Some say that cities will be terrible after the SHTF, but the Occupy coming together of people and networking has been impressive here in the Oakland/Berkeley area.

November 20, 2012 at 12:03 am #6450

Raúl Ilargi Meijer

“Optimism without bias isn’t pessimism, Dave, it’s just optimism…”

It goes a step further of course: a lack of optimism is not – necessarily – the same as pessimism.

November 20, 2012 at 12:07 am #6451

pipefit

The biggest lie of all is the extent to which the USA Dept. of Labor understates consumer price inflation. If they used the same methodology they used in 1990, the reported CPI inflation number would double the reported number (6% instead of 3%), and if they used the 1980 methodology, it would more than triple!!!

You can see the consequences of this plainly in the collapse of Hostess Brands, the baker of Twinkies and other snack cakes. The workers went on strike, refusing to take a big pay cut, even as the company was bankrupt, forcing the company into insolvency. The workers have seen the buying power of their pay eroded by the outlandish inflation of the last decade, and felt like they couldn’t take any more loss of buying power.

This is the just a taste of what is to come as we get deeper and deeper into this hyper inflationary depression.

November 20, 2012 at 12:15 am #6452

Raúl Ilargi Meijer

“Why Freud? Why not Jung, instead? I think choosing one psychoanalyst over another is quite arbitrary. Was the selection of Freud made because he happens to fit your preconceived ideas about how humans work? “

You have me wondering who has preconceived ideas here, and about what. I’m not choosing anything, and I would never suggest studying Freud without Jung (or Marcuse), anymore than I would the other way around. For all his failures, though, Freud was the pioneer that others reacted to, even if often in very constructive ways. And for all his failures, Freud can help people better understand their inner beings, certainly when it comes to topics like optimism bias. Not that they would need psycho analysis for it.

“Just because AE has been accurate with how the financial sector works doesn’t mean you automatically have intellectual purchase in the realm of human psychology.”

That may be why nobody has suggested anything of the kind.

November 20, 2012 at 12:29 am #6453

SteveB

pipefit post=6156 wrote: The biggest lie of all is the extent to which the USA Dept. of Labor understates consumer price inflation. If they used the same methodology they used in 1990, the reported CPI inflation number would double the reported number (6% instead of 3%), and if they used the 1980 methodology, it would more than triple!!!

That reminds me of some relevant inaccuracies called out by Evans in Risk Intelligence regarding the credit rating agencies (2005-2007 data):

“The agencies gave the highest-rated securities (AAA) a mere 0.008 percent chance of defaulting in the next three years (that is, a chance of less than 1 in 10,000). The real chance, it turned out, was 0.1 percent (1 in 1,000). The agencies underestimated the probability of default by more than a factor of 10. With securities rated A+ the error was even worse, with the agencies underestimating the probability of default by more than a factor of 300!” (p. 119) [Note single exclamation point restraint. ;)]

November 20, 2012 at 12:48 am #6454

pipefit

Steve quoted Evans as, “The agencies underestimated the probability of default by more than a factor of 10.”

Perhaps there was some under estimation, or maybe it was fraud? The information we have to work with is not very good. This is why it is so critical for every human, optimist or otherwise, to load up tangible items, held in your own possesion. We really don’t know how many claims there are on financial assets. Think rehypothecation.

People, being generally honest, have this naive hope that the folks running the financial system share the same moral values, such as the respect for private property. Misplaced optimism?

November 20, 2012 at 12:54 am #6455

ashvin

g-minor post=6150 wrote: Neither Freud nor Jung had a clue about how the brain works. Both were steeped in 19th Century romantic notions of individualism, invented theologies of mind and consciousness and tried to pass them off as science inflected with poetry. Psychologists are just coming around now to recognizing the physical, material facts about what goes on in our heads. Freud and Jung were just telling stories. They may have helped to make us aware of the limitations of what we call our conscious minds (sic) but they didn’t understand that our perceptions of ourselves and others don’t necessarily correspond with what is going on there, and that DNA runs the show with a single-minded agenda of its own.

This is just a materialist conclusion, not necessarily supported by modern science. There are many aspects of the mind that are not reducible to physical processes in our biochemical systems. The more we study human history, nature and the mind in both animals and humans, the more we discover that humans are different in kind from other animals, not just by degree of intelligence or emotional capacity. That, to me, suggests that DNA does not in fact run the show.

With regards to optimism, it all depends on what your philosophical assumptions are. There are very sound philosophical foundations for hope in the face of tragic circumstances, if you accept that there is purpose and direction to everything. Even tragedy and suffering has spiritual purpose, and that is something to be optimistic about. However, if you place your faith and trust in philosophical materialism, a world consisting solely of mindless physical processes, with no greater purpose than human pursuits and goals, then there is very little to be optimistic about, even in normal circumstances.

November 20, 2012 at 4:30 am #6456

davefairtex

Optimism, pessimism, fatalism – all interesting words.

Sometimes it seems like – and I’m paraphrasing JMG here – the only two permissible thought-states in this TSHTF dialog are self-deluded hopeful optimism and well-informed apocalyptic fatalism. I’d like to find another state, if possible. I’d like to retain my pro-survival health-inducing positive and hopeful attitude, while not letting that stop me from taking steps to limit downside risk and expecting trouble coming on the horizon. I don’t find that particularly easy.

That Prison of Debt Paralyzes West article – a good big picture look at where the western world really is; government, debt, prosperity, expectation, and economics. Thanks for the link.

It is clear that the reason for the downward spiral in Spain & Greece is that prosperity in both places was debt-funded illusion, and that they are the canaries in our global coal mine. How will our unwind take place, and what will it look like? When will our illusory prosperity vanish, how will we handle it, and how will that impact government and our collective mental state?

We do not have control over events, but we can control how we react to them. In fact, that’s really the only control most of us have over our existence here on earth. Remaining personally hopeful and positive – I won’t use the word optimistic – is my goal. For me, remaining in a negative mental state is unhealthy and thus anti-survival. That seems like a bad idea overall, even if it might provide more motivation to prepare.

This is a really good discussion I think, at least for me.

November 20, 2012 at 5:22 am #6457

Babble

A pessimist is an optimist that life has kick to death. It seems to me that it is easy for people to lie to themselves, they often just ask some god to forgive them if they realize the lie.
This is easily seen in people who became estatic about completely nutty candidates like Palin, Bachmann, Santorum, etc. The more crazy the candidate the more they cheered.
The problem with the economy is that you hear every side, all the time. Its nearly impossible to sort it out while believing in “the end is near” forces either acceptance or you must take action. We have been hearing this for years so belief withers. This is not lying to oneself, it is just exhaustion.

November 20, 2012 at 7:18 am #6458

scott

ilargi, nice article. I guess reality is a hard pill to swallow when most want to believe the lie.
ash, thanks for the comment. Reminds me of the fact that chimps and humans share 98% of the same DNA. Seems pretty obvious to me that there is a lot more to being human than DNA.

November 20, 2012 at 2:18 pm #6459

backwardsevolution

Scott – “…chimps and humans share 98% of the same DNA. Seems pretty obvious to me that there is a lot more to being human than DNA.”

But what’s contained in the remaining 2% is most likely very important. Humans, unlike all other animals, have regret about the past and fear for the future. We have egos – big ones – which we protect like a mother bear protects her young. But I agree with you, there is more than just DNA involved.

It’s called fear.

Adam Goodwin – “It could be argued that it’s because of the social control powers of money–and materialism, itself–that we suppress who we are. Jung wrote that hierarchy, especially the state, repressed the inevitable process of individuation in a mature adult. The process of individuation, where the unconscious is brought together with the conscious mind into a concurrent whole….”

This is what Maslow said, that you cannot step up the ladder if your needs are not met. I agree; with the treadmill-type existence that most families live under, under constant stress of losing their jobs, their homes, their families, it’s no wonder they remain on the lower rungs. TPTB most likely are very aware of this fact and want to keep it this way. The surest way to keep people dumbed-down is to keep them under constant chaos and stress because then they have no time to think, to evolve.

November 20, 2012 at 8:43 pm #6460

ashvin

scott post=6163 wrote: ash, thanks for the comment. Reminds me of the fact that chimps and humans share 98% of the same DNA. Seems pretty obvious to me that there is a lot more to being human than DNA.

I’d say there’s a lot more to being a chimp than DNA too. I believe many animals have immaterial souls (mind, will and emotion), but humans have souls and spirits, the latter being what makes us unique and gives us human culture (art, music, language, etc.), ego/pride, existential thinking, religion/spirituality, moral conscience, sin/remorse, deep emotional suffering, etc..

November 20, 2012 at 11:25 pm #6461

jal

The surest way to keep people dumbed-down is to keep them under constant chaos and stress because then they have no time to think, to evolve.

I see some truth to that.

My experience, The Mother of invention, is boredom, not necessity.

November 21, 2012 at 6:00 am #6462

Nassim

jal,

I concur with you. I find that I am at my most creative when I have nothing “important” to do – like right now. :)

I think boredom is a very valuable thing. I try to make sure that my kids are bored some of the time. Of course one can be actively doing something physical or repetitive and be bored and creative. One does not have to be sitting along on a bench. Watching a boring program on TV or reading a boring book does not inspire that sort of thing.

November 21, 2012 at 3:23 pm #6463

Anonymous

I wonder if Ilargi or Stoneleigh are familiar with stirling Newberry’s “american thermidor” thesis.

[http://archive.truthout.org/article/stirling-newberry-american-thermidor

I’m not as much interested in the thermidor aspect, for present purposes, as your response(s) to his economic thesis. If one or both of you could respond to American Thermidor (energy deficit –> trade deficit –> investment deficit –> bubbles –>…)

I understand that Nicole has firmly stated that that mania can occur sans…any need for for mania, any primary deficit in needs, being born purely of the nature of incentive motivation itself; and I wholly agree; but Stirling’s argument is of a substantive (motivation is related to outcomes!) type.

Please don’t confuse my meaning of “substantive:” either incentive motivational (pavlovian) or outcome-oriented (skinnerian) will do for my purposes.

My point is, what do you think of his argument?

November 21, 2012 at 4:22 pm #6464

Raúl Ilargi Meijer

compound f,

I’m not quite sure what you would like to hear. It’s not as if Newberry’s ideas are all that unique or novel, in my view. His insistence on phrasing his issue in terms of American party politics strikes me as making that same issue unnecessarily shaky; just another ideologist, that sort of thing. And perhaps he can be forgiven for missing out on the consequences of for instance the housing bubble, since his piece is 7.5 years old. But that doesn’t change our perception that financial bubbles have their own internal dynamics, even though Newberry completely ignores this. I also have my doubts about his phrasing the issues in a US-centered format; that not only seems awfully naive by now, it already wasn’t very smart in 2005, even if to this day there’s plenty misconceived talk of decoupling. We are in a global bubble, not a local one.

In short, Nicole and I have always rejected the notion that peak oil caused the bubble we’re in, and we see no way whatsoever to change that. That doesn’t mean that energy and finance won’t or can’t interfere with each other in the future of course, just that a causal relationship here and now doesn’t exist in the way many people claim. Which seems to stem from an overly one-sided focus on energy issues, if anything: hammer meet nail. Going forward, we do see financial issues exacerbating energy issues, when money, credit, simply won’t be available to maintain existing energy infrastructures, let alone allow for a shift towards alternative sources if oil were to be less available.

November 21, 2012 at 10:38 pm #6465

ChartistFriendPgh

It’s A Housing Bounce, Not A Housing Bottom

http://chartistfriendfrompittsburgh.blogspot.com/2012/11/its-housing-bounce-not-housing-bottom.html

November 24, 2012 at 12:17 am #6476

bentrem

“this is certainly no time for easy optimism, but tragically, that’s all we got.”
Do you really belief this? Slopping thinking, or just slopping writing? (In-group dynamics; shared cynicism enables folk to share snickers and giggles over such as this.)
In any case:terrible attitude. Confident to the point of arrogance, but really thoughtless … like a prideful child.

“We’re only static on the radio, picking up speed.”
Radio static can “pick up speed”? Oh … really. You don’t say.
I’m shocked and surprised to see such self-satisfied, self-indulgent sloppiness passing for thoughtful analysis. Oh, wait, no, I’ve been watching my cohort for 44yrs … not surprised.

November 24, 2012 at 12:42 am #6478

Adam Goodwin

Ouch! How is someone supposed to rationally respond to that critique? If someone wrote that to me, I wouldn’t know how to react–get angry or thank them. :) Sometimes it’s better to just leave such things unspoken and let people figure it out themselves.

But, one’s optimism is really no one else’s business but your own. No one has the qualifications to write about another’s optimism, because that’s their inalienable state of mind. Too much personal judgment buried in any social analysis (economic or political) about how other people are or should be. All assumptions (aka ‘social science’) about other people outside the Self are just probabilistic models reliant on correlative data. Always gonna be black swans.

I’ve always felt more grounded because of the peak oil (and economic effects) material I’ve read. It’s pushed me to become a more mature and self-reliant person. If anything, the limits’ literature is necessary to convince us we should no longer rely on people we can’t see.

November 24, 2012 at 2:20 am #6479

Professorlocknload

Voluntarily or by decree, you ‘vil be optimistic and you ‘vil like it!

It seems the power has always believed “Too much liberty is a bad thing.” It’s now becoming consensus. Tell it long enough, often enough, and, well?

Was Putin really that far off the mark when he said the US is becoming more like the old Soviet Union every day?

Political evolution, I guess.

November 24, 2012 at 3:13 am #6480

Nassim

Here is an excellent example of optimism-bias:

“Preventing Armageddon Would Cost Only $100 Million … But Congress Is Too Thick to Approve the Fix”

http://www.zerohedge.com/contributed/2012-11-23/preventing-armageddon-would-cost-only-100-million-%E2%80%A6-congress-too-thick-approv

I guess when something like that happens, they will blame it on the “terrorists”

November 24, 2012 at 12:06 pm #6482

Ian

Oh dear, what a sad little place TAE has become! Virtually deserted; nothing going on, move along.

That’s what you get for autocratic rule, cencorship and galavantly around the world instead of doing the knitting at home..

I could say ‘I told you’…and I will. But still sad.

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