What Lies Beneath

The psychologist Elliot Aronson describes scapegoating as the tendency to "displace aggression onto groups that are disliked, that are visible, and that are relatively powerless." In medieval times, the Catholic Church regarded buying with the intention of reselling at a higher price as unjust, and merchants who marked up prices during times of scarcity were often vilified. In England various forms of commodity speculation became crimes punishable with fines, pillory, and imprisonment. Such prohibitions on speculation backfire. Merchants then have no incentive to store or transport goods to the time and place where they are most needed. Read More

To Dan Ariely, the invisible hand---the market force that gets people to help others, even when that is no part of their intention---is a pleasant fantasy. Unfortunately, Dan argues, the recent financial market crisis shows that the self-interest of financial managers led to cataclysm. Dan blames this on "our unblinking faith in the invisible hand," which, in Adam Smith’s version, "… does not exist." According to Dan, the real invisible hand is human irrationality, "pushing and prodding us along a path can lead to destruction." But how does irrationality cause market mirages, and political ones?  And instead of either blind faith in markets or blind faith in government, can we form a balanced critical assessment of each? Read More