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The illusion of rational man; enter the economics of fear
12 May, 2009 07:37:05
By W A Wijewardena
May 12, 2009 (LBO) - The Greek historian Plutarch has recorded an encounter which Alexander the Great had with one of the sages of Taxila University, Dandamis, in the third century B.C.
The youthful emperor, having been impressed by Dandamis’ skilful resolution of numerous riddles thrown at him, had asked one final question: 'how can one make oneself loved and respected?'

Dandamis had a straight answer to this question: 'if one has immense powers, but does not inflict fear in others, then, one is loved and respected'.

This answer paraphrases one of the fundamental tenets of the behaviour of species: ‘The fear is painful and reduces pleasure. The removal of fear adds to happiness and is desired by everybody’.

Disutility

Economists have termed the pleasure which a person gets out of a desirable experience as ‘utility’. In the opposite, the pain out of an undesirable experience has been called ‘disutility’.

A person’s action, if he is rational or, in other words, not influenced by emotions, prejudices or biases, is always guided by his desire to avoid disutility and seek for utility.

Since fear brings disutility to a person, he would do anything to avoid fear. Similarly, if he is already inflicted with fear, any promise of eliminating fear would be instantly embraced by him.

Sociologists have termed the current era as an 'era of fear'.

Given the society's loud expression of fear of meeting with catastrophe from almost everything currently being experienced, climatic change, globalisation, terrorism, genetically modified food, polythene and many more, the rationale for this classification is understandable.

However, it prejudges that fear is a novel experience and the degree and extent of fear tend to rise as time passes, for otherwise, the current era cannot be singularly called the era of fear. It, therefore, does not depict the actual situation.

Human beings, throughout their existence on the planet, whether as hunter-gatherers or cave-dwellers or civilised cohabiters, have always been living in fear of what they could not understand: the fear of the unknown.

If the unknown cannot be learnt, then, it spawns risk. Hence, the fear of the unknown emanates from the fear of risk and that human mental state has been a common feature in all the eras.

Fear is, therefore, irrational and does not tally with the concept of the rational man.

Behavioural Economics

How did the economists, then, manage to accommodate an irrational emotion like fear in their analysis which has long been based on the assumption of the rational man? This happened when the frontiers of economics were expanded in early 1970s by drawing on the findings of behavioural sciences like psychology.

According to these findings, the behaviour of man was completely different from the objective rationality which economists had presumed to prevail when man is confronted with making choices.

Thus, economists of new era began to look at the economic man as a maximiser of pleasure based on the instinctively guided emotions with which he is basically made of.

Research into human behaviour by Daniel Kahneman, a psychologist by profession, but winner of Nobel Prize in economics in 2002, helped economists to develop a new branch in economics called ‘behavioural economics’ later. Fear is analysed by economists under this new branch.

Economists do not propose remedies for the desirable or undesirable consequences of fear. They analyse the sources of fear, behaviour of those who take advantage of fear in people or its free riders and how the market distortions arising from its undesirable consequences require modifications to the mainstream economic theory.

Heart vs Head

Psychologists had long found two divisions of the functioning of the brain, the emotional side and the rational side. In popular parlance, the emotional side was known as ‘heart’ and the rational side as ‘head’.

The rational economic man on whom the economists built their theories came from this rational side of the brain. He was expected to draw on his past knowledge objectively, analyse all the information available and make choices by taking into account all the costs and benefits of his actions.

The emotional man, on the other hand, is guided by his heart. Accordingly, he will make choices on the basis of fear and its consequential offspring, prejudices and biases. The two sides of the brain are in total conflict with each other.

As such, it is essential for the rational side of the brain to dominate the emotional side, if the traditional economists are to establish the validity of their theories.

But the psychologists like Daniel Kahneman found evidence to the contrary. In the majority of men and women, irrespective of age, educational level or social status, the emotional side was dominant and, hence, the choices they made were faulty and contrary to the predictions made by the mainstream economic theory.

Fear is one such disturbing element that mars the rational thinking of many and leads to faulty choices.

If the majority of people are driven by emotional elements like fear, then, there are many who stand to gain by rousing fear in people. The list is long, but some prominent gainers are marketers, media men, certain religion-preachers, social activists and politicians.

They maximise their gains by arousing fearful emotions of one type or another in their target groups.

In their day to day life, people are bombarded with statistics, information and news of various types of catastrophe without substance or authenticity. A rationally thinking person would very quickly dismiss them as baseless.

He would draw on the store of his knowledge, evaluate the plausibility of the happening and rationally decide to reject the information or the statistics presented to him. But this process, known as acquiring ‘rational knowledge’, is difficult, time consuming and costly.

Therefore, not many would venture into arming themselves with such costly knowledge. Man has always been a lover of cheap ‘instant products’ and ‘emotions’ come both cheaply and instantly.

The best example is the case of emotionally wired people. They choose to remain irrationally ignorant of the true facts, even when opportunities are afforded to them to acquire rational knowledge.

Exploiting Fear

Such emotionally wired persons would, therefore, take the easy path and treat the bombarded information differently. They would find the news or the statistics confirming what they already hold as true. They would not take trouble to verify their accuracy or authenticity and accept them as true without probing into them.

This lazy approach which emotionally wired people adopt when making judgments is sweet music to those who scheme to gain out of their irrational and emotion-driven ignorance.

The modus operandi adopted by them is the same: first, they arouse fear in people and, then, offer them with remedy to get out of fear.

Examine how marketers do it in catching the vulnerable people into their trap.

If women are fearful of getting old, the marketers would first show them how they would lose everything due to old age and, then, project their product as one that helps them to stay young forever. If young girls are worried about their dark complexion, the marketers would first add to their agony by showing how they lose job prospects or marriage proposals because their not so fair complexion.

Then, they would offer a product that would guarantee a fair skin. If men are unduly concerned about grey and falling hair, those concerns are first confirmed by the marketers by throwing them into encounters in which their male ego is hurt incurably.

Then, a product, described as something to restore their hair line and solve all their problems, would be offered to them. In this manner, marketers would surreptitiously and shrewdly exploit every fear, prejudice and bias which people harbour in them and gain out of such fears.

Politicians are not a better lot when it comes to exploiting fears of people for their gain.

They would rouse the already teeming fears about terrorism, gloomy economic conditions, globalisation, privatisation, selling of water to multinational companies, loss of job opportunities due to arrangements with IMF or World Bank and so on to their advantage.

They also fuel irrational fancies like nationalism and patriotism to drive emotionally wired people to their camps. So, everyone uses the fear in others to gain an advantage for them.

This is not a new phenomenon and there is evidence that it was practiced even in the past.

Kautilya, the third century B.C. Indian economist who wrote the economic text Arthashartra, advised the king on an ingenious way of filling the state treasury.

‘If people find certain spots on the moon’ he advised the king, ‘the king should send his cohorts around the country spreading the news of their malefic effects. Then, the king can produce a remedy and sell it to those gullible people’. So, shrewd politicians would first rouse fear in people in the same way as marketers would do. They would bombard people with news addressed to the emotional side of the brain.

Once the target group is sufficiently alarmed and domiciled, they would offer the solution to rid that fear. This has been the art employed by politicians of every country and every generation for amassing the votes of gullible voters.

Herd Behavior

Anyone bent on exploiting emotions of people for their gain could easily do so due to the ‘herd’s behaviour’ of people like animals.

Psychologists who conducted experiments into this area as far back as 1953 found that the majority of people tend to accept the falsehood as true even when they know personally that it is false, if others continue to say that it is true.

So, laying a trap to capture people is easy: get as many as possible to chorus the falsehood repeatedly and then all of them voluntarily fall into your pocket!

The way to avoid being victimised by deliberately planned fear or emotion-rousing schemes is to develop one’s rational mind. To do so, one should first get rid of fear that is embedded in the emotional side of his brain.

It comes from long learning, understanding and developing a probing mind. Or it may come from tenaciously held cultural traits as demonstrated by Dhammapala Jataka.

In this Jataka Story, a father could not be fooled by showing him the bones of a dead animal as the bones of his dead son.

‘In our clan, people do not die young. Hence, this cannot be my son’s bones’ the rationally wired father tells the shocked demonstrator.

As a result of father’s rational stand, the cunning demonstrator finally had to bring out the son from the hiding place and present him to the father.

So, developing rational men and women is costly.

Hence, societies are full of irrationally ignorant people driven by emotions like fear and its offspring, prejudices and biases.

They make choices that are different from the choices made by rational people. As such, economic theories which are based on the rational behaviour of people have been built on an illusion.

Economists do not offer ways of cultivating the rational side of the brain. It is not their job. Perhaps, it may be the job of psychiatric counsellors or philosophers to instil this wisdom in people.

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READER COMMENT(S)
6. charry uy Jul 15
If we say ''i luv u from the bottom of my heart'' that s wrong b'coz mind s the one who control us and give a message in our body...one s the hypothalamus
5. Creamy Jun 25
To a some (very great) extent I personally feel that one of Peter's Principles applies here - "Do not let another person ruin your day".

Read beneficial and factual literature, watch less TV, listen to less gossip (Good gossip is needed), be approachable and be of use to the society you belong to. This will definitely earn one respect resulting in all fear being vanquished.

4. Tilak May 13
Even rational people reason with their limited knowledge which is called the concept of bounded rationality. Rational being's reasoning is as good as his boundary of knowledge and when s/he encounters a situation out of the boundary, reasoning falls into intuition or the mixed of reason and emotion.

Fear and anger of course are perverse emotions and not true emotions that is the reason why ancient Chinese proverb warns people not to make promises when you are extremely sad, angry or for that matter even happy.

Economics being a complex social science is evolving and not completely a rational science. That is the main reason why economists play with probabilities in assessing risks attributed to fear of loss. It is easy to exploit emotions.

Lord Buddha 2500 years ago said that "do not believe something just because it is coming from the greatest sage or from your beloved parent, think, and reason and if it appeals to your reasoning then believe it." The root of the current global financial crisis is of course the irrationality because greed overcame the reason.

Is greed an emotion? of course it is another perverse emotion. I believe most human beings are rational but the degree of rationality varies based on accumulated knowledge.

Sometimes seemingly irrational behaviours are not irrational at all. They are based on human intuitions (gut feeling) and intuitions are based on accumulated knowledge. This knowledge can be deep or shallow. When it is shallow, for a person with deeper knowledge such bahaviour may seem irrational.

3. mw May 12
A long one - but very interesting. I had grappeled with some thoughts similar to these for a while.

Nice, clear writing (i.e. structure)

2. Lakshman Dalpadado May 12
Very interesting subject and I agree with the author 100% that '" If a lie is repeated long enough people will eventually believe it's true". This is why millions of people believe in religions and philosophies based on fabricated stories and hearsay, laced with a big dollops of hallucinatory episodes.

However, the Dhammapala Jataka story he quoted as an example of rationality is the height of irrationality.

Only an irrational person would say that his son cannot be dead because all his clan are long lived -the child could have been killed or died of an accident!

None of the devotees of Sai Baba bother ask why he is producing only small objects like rings, ash and watches, that can be hidden in the palm of his hand, and not a car, TV or a house- or why he wears long sleeved tunics all the time. The answer is obvious to any rational person - it's pure simple magic.

One cannot rationalise ones feelings of love, sadness or pleasure or anger. After all what is love or pain? We cannot even define pain in meaningful way, let alone rationalising it. But what we can do is rationalise our responses to our feelings based on education, experience and socio-cultural requirements.

1. lakshman Dalpadado May 12
How to earn love and respect? Simple - just excuse everybody else's deficiencies, failings, incompetence and idiotic behaviour.

Founders of religions did just that and see how well respected they are.