Sunday, May 27, 2012

Why recession? Culture and perceptions haven't kept up

The discussion about Maslow and the counterculture just below shows that "self-realization" can cause enormous problems and suffering, if we have flawed ideas about what it means in practice.

G sometimes asks me: if we have abundance and a saturation of material goods, why do we have the crash and continuing poverty and recession? And the answer is in essence: because we haven't learned yet to cope with abundance. Abundance means we need an evolution of institutions and incentives and virtues, not a release of the id.

We have not adapted the culture to make the most of abundance. We have not thought enough about what it means if people are no longer working for bare survival. Wants are not as obvious.

We have not insulated the culture by developing new restraints and guidelines to help people avoid mistakes, and help them to work together.

We have not thought about what new incentives we need if some of main systems of incentives are eroding or affected by economic change. We are too reliant on market signals alone, when market signals are not so well suited to higher levels of the pyramid of needs.

We do need to allocate resources efficiently so much as help people navigate choices and flourish in a way which brings benefits to themselves and others.

So people overleverage and miscalculate risk and fail to develop even basic financial literacy. People think about short-term benefits instead of long-term fiscal strains. They leverage up too much and behave badly. They drift, they fail to pay attention to relationships, they rack up credit card debt. They fail to think about the future, or engage in counter-productive rat race behavior.

Abundance does not stop people making bad decisons. In fact, it makes them more likely to make poor choices, as we have not had a chance to evolve cultural norms to help make the right choices.

This is the main point in Avner Offner's brilliant book, The Challenge of Affluence. He says:

The strategies of self-control take time to discover, learn and teach. If these rewards arrive faster than the disciplines of prudence can form, then self-control will decline with affluence.
People need some self-control to be successful and happy and work together. So we have a pattern of overextrapolation, overreaction, denial and indecision.


The Bridge


This links together two of my main areas of interest - abundance, and perception/decision-making. And that is quite satisfying to me. There is a bridge between abundance and perception.

We need to adapt our institutions to help people make better decisions. We need too help people avoid illusions. We need to help people realize the possibilities of abundance rather than the problems. To do that we need to pay more attention to how people flourish. And that means we need need a return to the virtues.

That could almost be a personal mission statement for me.


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