Behavioral finance and political calculus.

My last post raised a discipline called behavioral finance, specifically one of its concepts, prospect theory. Four other concepts described by behavioral finance that help explain human irrationality are: Confirmation bias shows that people tend to be more attentive toward new information which confirms a preconceived opinion or belief. Hindsight bias, on the other hand, explains why we might believe that, after the fact, the occurrence of an event was obvious. Herd behavior is our propensity for following the decisions of a large group, whether or not those decisions are rational. Overconfidence allows us to believe that we are better able to perform a certain action or task than we actually are. I applied prospect theory to the irrationality of arguing against objective truth, at least if you are living as if there is objective truth.

I think it’s equally bad, if not worse, to equate your political agenda with objective truth, rather than it being simply your opinion. Carl Trueman recently wrote, in The Gospel Coalition: “...it can be argued that, culturally speaking, Marx did win—because his vision of a society where everything’s political is our world. From cake-baking to what consenting adults do in the privacy of their own bedrooms, from the gendered membership of school sports teams to the ordination requirements of a church to the casting of an actor in a movie, everything has taken on universal political significance. This is now part of the intuitive way in which we all think about society—whether we’re on the right or the left. Once one side decides, for example, that the Boy Scouts needs to admit girls in order to break down gender inequalities, then those who oppose this change aren’t acting in a politically neutral way. They too are taking a political stand.” How did this happen? The latter four behavioral finance concepts, or biases, partly explain it. I could cite a number of examples of each of those biases in political headlines, but I think it’s more worthwhile to understand the forces and agendas behind the politicization of our world.

John Marini, author of Unmasking The Administrative State, has questioned the legitimacy of rule by experts, and exposed it as an attack on the constitutional system of the separation of powers, balances and checks, and accountability to the electorate. Marini points out that now we have achieved unwittingly something no previous crisis managed to accomplish. We have a clear opposition between populism and Progressiveness. The very accumulation of power in Washington has made it the favorite target of political ire. The American people can now decide between the Founders’ Constitution and the progressive—or “living”—Constitution. The latter, the doctrine of the Perfectionist Progressives, is reducible to rational control of human affairs, organized through the federal government, especially the non-elected parts, whether federal courts or executive agencies (which are under very limited control by the president). Central planning, like a socialist state.

The former, the Constitution and the real American Way, admits that governments do not create human rights—they only recognize or violate them. Where does the idea of human rights come from? “We hold these truths to be self evident, that all men are created equal and are endowed by their Creator with certain inalienable rights…..” Sound familiar?