Endless Curiosity

April 16, 2009

Hit by a bus on Wall Street

Filed under: Economics, Psychology — Alec @ 4:23 pm

There’s a great article in The Atlantic Monthly about how the financial crisis has affected the writer. The thing that caught my eye was when he talked about how there seems to be an air of passivity and resignation among the public, one that I completely relate to.

Here’s a quote from the article:

But for now, no whining: just confusion and bemusement and fear, along with an uncharacteristic sense of paralysis. In the past six months, I’ve bought and sold virtually no equities. And I rarely take the pulse of my 401(k).

I called a psychologist to find out what could explain this weird passivity. Daniel Kahneman is a Nobel Prize–winning innovator in the field of behavioral economics. He explained that my feelings of paralysis were to be expected.

“You no longer know the world you live in,” he said. “You played by the rules, the rules benefited you. The world functioned according to some regularities. Right now, it’s unclear what rules apply. There is a new regime. What seemed prudent earlier has disappeared. I’m surprised Americans aren’t more panicked. Americans seem to accept a level of insecurity in their lives that Europeans wouldn’t tolerate. Paralysis is one response to this level of insecurity.

This might explain why my wife and I have taken no action to fix our finances.”

Here’s the full article.

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