Author: ken

The Need to Belong

Should it surprise us when experts actually agree? They frequently are invoked to express clashing points of view. But, sometimes, when they are free to look at the evidence and reach their own conclusions, they can achieve a high level of unanimity.

A recent survey of professional economists, “which asked whether the American Recovery and Reinvestment Act — the Obama ‘stimulus’ — reduced unemployment,” produced a surprising response. “All but one of those who responded said that it did, a vote of 36 to 1. A follow-up question on whether the stimulus was worth it produced a slightly weaker but still overwhelming 25 to 2 consensus.”

Paul Krugman recently made this point. Hammering away at the need for economic stimulus for a couple of years now, he was clearly enjoying the evidence that he was not the “unicorn” one commentator on CNBC said he was. But there is a larger point here: people hold on to their beliefs in the teeth of evidence to the contrary.

It depends on the context. Members of a group will be profoundly influenced by what the other members believe. Those engaged in partisan politics find it hard to separate from the crowd. Those whose identities are tied to specific ethnic or religious sectors of the population tend to conform to their dominant myths. The pressure to be accepted or included, to be seen as “reasonable” or “intelligent” or just “one of us,” is profound, whether you are a presidential advisor, a scientist, just playing a game of pick-up basketball on the street or managing a hedge fund.

In short: the need to belong trumps the need for reality. It is not so much that we are deceiving ourselves and others as that we fall under the sway of a stronger and more compelling pressure.

On the other hand, there is what James Surowiecki called “the wisdom of crowds,” the fact that the collective judgment of many can be uncannily accurate. And we have the example Krugman cites of economists substantially agreeing on the meaning of economic data. Another example: climate scientists converging in agreement on global warming.

The point is that if individual minds can be freed from the pressure to fit in with other minds, if they are not bent into conformity, suppressing their differences — and if they are not deviant or wildly idiosyncratic – they can be relied upon to give us useful and reliable pictures of reality. And they can agree.

But our perceptions do need to be confirmed by others, and we need affirmation. We want to belong. And that’s not just because we are weak or insecure – though, of course, we are that too. We are social beings, living in families and communities. We have to understand each other and act together to get anything substantial accomplished.

Those needs easily lead into being intolerant, opinionated and wrong. And frequently we have no idea it is happening to us because everyone else seems to be in agreement that we are completely correct.

That’s why it’s good to have experts, people who study facts. But the experts need to be independent, not only not for hire but also able to speak their minds without the contagion of group process. How rare is that.

What Neuro-Science Adds and Takes Away

The powerful don’t empathize with those less powerful, according to new research reported in The New York Times. The reason offered is that, “when people experience power, their brains fundamentally change how sensitive they are to the actions of others.”

This is a nice example of how cognitive neuro-scientists, focusing entirely on “objective” evidence, in this case the activity of “mirror neurons,” miss out on the common sense meaning of human behavior. An earlier explanation of this well-known effect, offered by Susan Fiske, a psychologist at Princeton, is that “powerful people don’t attend well to others around them because they don’t need them in order to access important resources.” They “already have plentiful access to those.”

Conversely – and perhaps more importantly – the less powerful are acutely attentive to the opportunity to gain allies or avoid powerful enemies. Empathy is instrumental, and our drives to survive and thrive guide our sensitivity and perception. That’s the reason we have to understand motivation.

To be sure, the researchers suggest that theirs is a “complementary” reason, not the only explanation. It makes sense that human motivations inevitably are implemented by neurological activity. We inhabit our bodies and our bodies help us out. And sometimes our bodies are a bit ahead of our minds, initiating actions before we are consciously aware of the dangers and opportunities we encounter. In those cases, consciousness can supervene and influence the outcome.

Perhaps a better way of putting this is that the understanding of motivation and neuro-science are two sides of the same coin, two perspectives on the behavior of our “mind-bodies.”

Looked at this way, what the researchers appear to have found is one of the many mechanisms in the brain that help us in our never-ending struggle for survival. That is not insignificant. But more significant for our well-being is understanding the motivations that guide our behavior, making it possible to have more intelligent, compassionate and aware selves as well as communities that promote and support those selves.

The neuro-researchers sum up their findings by suggesting that the powerful are hardly “heartless beings incapable of empathy.” They were subject to a temporary set of manipulations in an experiment. Or, as they put it: “The good news is that they are, in theory, redeemable.”

The better news would be our finding ways as a society to remind the powerful, who do not “need” the weak, to become more mindful of them. They are fellow humans, after all, brothers and sisters, colleagues, citizens. Moreover, if ignored, they might sabotage our plans or, worse, rise up in rebellion.

Sucker Genes?

It seems that the easiest people to scam are those who have been scammed. According to Doug Shadel an expert at AARP: “It’s pretty well known in the fraud world that the best list to get is the list of people who have already been taken.”

That might suggest a genetic vulnerability to sweet talk. But it is more likely that the explanation is entirely psychological and rests on a powerful and irrational desire to believe in a special relationship with another person who wants to help you.

Such a desire in most cases is probably rooted in early disappointment. Having faith in someone who lets you down – when you are particularly needy or inexperienced – leads to one of two likely consequences: you become cynical and mistrustful, generalizing from that experience to others, protecting yourself from being hurt again.

Or else you deny that it has happened. That denial can stem from feeling that the person who disappointed you is too important for you to give up, like an inconsistent parent whom you still need to offer protection. So you soft-pedal your hurt, explain it away, or you refuse to remember it, preserving the offender, while also sparing yourself the embarrassment or shame of having been gullible.

If one is prone to that response, one is all too likely to establish a pattern of vulnerability to fraud. In other words, sensing the possibility of fraud, that person will look the other way. Remembering the earlier experience of disappointment and hurt – often unconsciously – he takes that as a signal to spare himself a painful repetition. He also then is able to retain his belief that someone, someday, will want to help him.

“Mr. Shadel said he was surprised at first to learn that con artists preferred to focus on investors who had already fallen for scams because he expected that victims would be on guard. . . . But during interviews with con artists over his career as a consumer advocate [he] learned that, in the view of criminals, the victim who has lost $10,000 in an energy scam has passed the test.”

The New Norm?

Researchers have created an “index of corruption,” using a data base of court cases to rank different states.

According to Fortune, the “researchers studied more than 25,000 convictions of public officials for violation of federal corruption laws between 1976 and 2008. And they found the cost to be an average of $1,308 per year, or 5.2% of those states’ average expenditures per year.”

Before this systematic research, we all had impressions and opinions. So it will come as no surprise that topping the list of the most corrupt states are Mississippi and Louisiana. But who would have thought that Illinois ranks as the forth most corrupt state? And what about New York, the financial capital of the world?

According to the report, “states with higher levels of corruption are likely to favor construction, salaries, borrowing, correction, and police protection at the expense of social sectors such as education, health and hospitals.” The paper explains that “construction spending, especially on big infrastructure projects, is particularly susceptible to corruption because the quality of large, nonstandard projects are difficult for the public to gauge, while the industry is dominated by a few monopolistic firms.”

To be sure, the data is based on legal proceedings and inevitably leaves out the corruption that does not come to the attention of prosecutors.

And it leaves out the private sector, including the financial industry, where the pattern has been for firms caught engaging in questionable practices to pay out immense fines without acknowledging guilt. Corruption there is massive, fueled by billions of dollars of profit.

Peering into these murky depths, another study based on a statistical analysis of trades strongly suggests that “A quarter of all public company deals may involve some kind of insider trading.” According to The New York Times: “The study, perhaps the most detailed and exhaustive of its kind, examined hundreds of transactions from 1996 through the end of 2012.”

“The results are persuasive and disturbing,” wrote The Times, “suggesting that law enforcement is woefully behind — or perhaps is so overwhelmed that it simply looks for the most egregious examples of insider trading, or for prominent targets who can attract headlines.”

The business school professors who did the study are so confident in their findings of pervasive insider trading that they determined statistically that the odds of the trading “arising out of chance” were “about three in a trillion.” (It’s easier, in other words, to hit the lottery.)

“But, the professors conclude, the Securities and Exchange Commission litigated only “about 4.7 percent of the 1,859 M.&A. deals included in our sample.”

It seems an inexorable conclusion that we are getting more corrupt. At the very least, corruption is becoming more pervasive and acceptable. As the new norm, businesses and individuals will feel that they will have to join the crowd in order to remain competitive.

As a result, elected officials will have fewer compunctions about accepting bribes or “contributions” to their favorite causes in exchange for favors. Investors will expect to know more that “outsiders” know and will be upset if challenged. Bankers will think it a reasonable goal to rig markets, and will figure out ever more ingenious ways to do that.

Or has all of this already happened? Perhaps we are just catching up with reality.

“Inversions”

What would you say to someone who tried to avoid taxes by registering as a resident in a state where he had, say, just a mailbox? Better yet, what would that state’s department of taxation say?

No deal, to be sure. But businesses are “moving” like mad, and “merging” to avoid U.S. taxes. The Treasury Department is objecting, according to a story in The New York Times, but it looks like they are going to continue to get away with it.

As the Treasury Secretary put it in his letter to Congress calling for action, “The firms that engage in these ‘inversions,’ still expect ‘to benefit from their business location in the United States, with our protection of intellectual property rights, our support of research and development, our investment climate and our infrastructure, all funded by various levels of government.’” And in most cases, few employees will actually have to relocate.

But nothing will be done because those businesses have friends in Congress. “Republicans in the House . . . have so far declined to pursue legislation on inversions and may not call a hearing or bring a bill to a vote.”

As a result of these and other manipulations of the tax code, our corporate tax rate is nowhere near what is should be. But without someone to pin the blame on, the public will continue to be virtually ignorant.

And it’s perfectly legal, unlike “moving” to another state without actually “moving.” Where are our “friends” when we need them?