International Law

Tyler Cowen: Don't Trust Your Gut?

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I was somewhat taken aback by Tyler Cowen's claim at money.cnn that you cannot trust your gut in uncertain times, especially if the uncertainty is due to market fraud.

I strongly believe that this claim is wrong: gut trumps brains for detecting fraud, and I have written on why before.

But, what Cowen was reporting on was research done Jennifer A. Whitson and Adam D. Galinsky

"These studies reconfirm what psychologists have been saying for years now: The more we feel out of control, the more our brains imagine patterns that don't really exist.

Doing that, the theory goes, helps us manage our stress. Maybe we haven't come so far from the rain dances common in agricultural societies.

It's precisely because they don't control the drops falling from the sky that many people construct elaborate rituals to pretend that they do."

(Here is the abstract of the paper on self-control and illusions, and here is a longer ungated discussion by one of the authors about why seeing is believing, unless it isn't.)

I recently wrote about magical thinking, but with a different take. I am not sure that relieving stress is the point, but certainly minimizing lack of control is right.

In 1959, Evon Z. Vogt and Ray Hyman wrote "Water Witching". It was a fascinating objective review of the practice of water witching -using a forked stick to find or indicate an underground source of water. The book was reprinted in 1979 and 2000, and despite our technological advances, it appears that dowsing is still with us.

But Vogt and Hyman did not argue that the witcher's were relieving the stress brought on by the drought in seeing patterns that didn't exist. I thought their point was much more subtle: serious decisions are often one shot, no repeated or not part of similarly situated events. And strictly speaking, modern decision theory tells us that we are on our own here - so the recourse to magical thinking which has the decision maker in control is neither irrational or rational.

The rational brain has nothing to say in these situations: but water witching stills seems pretty dumb to me, and a theory which by definition cannot explain why clearly has its limits.

Trust your gut instead.

Full post as published by Misleading Advertising Law on January 08, 2009 (boomark / email).