Re: [OPE-L] Crashes, Panics, and Expectations

From: Jerry Levy (Gerald_A_Levy@MSN.COM)
Date: Sat Mar 25 2006 - 08:26:30 EST

> Another issue is, that the "beliefs" I mentioned may lack any profound
> rational basis, indeed this is precisely why they are beliefs. People may
> act partly on the basis of instinct, intuition, impressions, superstitions
> etc. (didn't Keynes also refer to "animal spirits"?). And what may appear
> as irrational from one perspective of what rationality is, may appear as
> quite rational, if the matter is looked at from a different angle.

Hi Jurriaan,

Yes, that's true.

If one is attempting to grasp the concrete nature of an individual
social formation, one has to grasp the specific characteristics of
that social formation -- and that includes the cultural beliefs and
ideologies which are accepted by different classes and groups.

What one can _not_ legitimately do is to assume that what is the
case in general in terms of a very abstract presentation of crisis
is also the case when one considers an individual social formation.

The issue I posted, briefly re-stated, is that  there is a _moment_ of
_panic_ in the unfolding of an economic and financial crisis.   To
analyze  the possibility of that panic one has to take into consideration
issues of social psychology. What economic classes and groups believe
about what is happening in the economy matters.  What they believe
especially matters from the standpoint of trying to grasp the _timing_
of macro developments.

> But in
> truth, of course, people are normally pretty rational about the most
> important practical issues in their lives, and very resistant to
> propaganda which does not accord with their real experience of
> life, even if this happens not to be well-captured in economic
> theory.

I am skeptical  of this claim.

Is ideology rational?  Hardly.  Yet, ideological beliefs often affect the
actions of classes and groups.  Propaganda exists and -- in some
contexts (societies) -- it can be very effective.  Do I really need
to give examples from the US (the social formation that this thread
has focused on)?

Side note:  it might be instructive to look at what has happened in
recent years when there have been panics on Wall Street.
Technology,  state policy, and social psychology could all
be examined to grasp why the initial panics didn't trigger an
economic collapse (and how technology itself, in the form of
computerized trading programs fed the panic process).

In solidarity, Jerry

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