Friday, January 27, 2012

The Economic Normalcy Bias — David Sirota

In 1977, two Boeing 747s collided on an airstrip in the Canary Islands. According to accident investigators, those who survived the initial blast in one plane had time to escape before a fire consumed the wreckage. But eyewitnesses reported that many remained in their seat looking perfectly content--as if nothing was wrong.
Not surprisingly, dozens of these dazed victims were burned to death, and the episode became a reminder of the so-called normalcy bias--a cognitive phenomenon whereby many who are faced with imminent disaster instantly convince themselves that everything is normal and that they don't have to modify their behavior.
Unpleasant as this anecdote is to recount, it exemplifies the psychology at the root of one of America's most destructive traits: our obsession with materialism and consumerism. To extrapolate the metaphor, if our damaged economy, record-low savings rate and sky-high personal debt levels are that smoldering plane about to explode, then America's "shop till you drop" normalcy bias may be engineering yet another avoidable tragedy.
The most recent holiday binge exemplified the impending crisis. Despite persistent unemployment, flat wages and higher prices for necessities (food, health care, etc.), America nonetheless went on its usual post-Thanksgiving buying spree.
Read the rest at In These Times

The Economic Normalcy Bias
by David Sirota

"Obsession with materialism and consumerism" rots the human spirit. Sages of all times and climes were not being grinches when they cautioned against the corrosive effects, which are deadly for a culture as well as for individual aspirations based on enduring values. The so-called rational pursuit of maximum utility all too easily turns into what Keynes dubbed "animal spirits."


reslez said...

This is not about consumerism. Holiday gift giving is about confirming social ties. Humans are fundamentally social creatures. Without our social context of family and friends we languish at the bare minimum of survival. Most people have a fundamental need for more than that, even if it's only at holidays.

No gift exchanges, no weddings, no social gatherings, no funerals. These are all fundamental to culture. Are we human beings or cogs in a capitalist machine?

If they have access to credit some portion of the population will use it. Calling this "rot" of the "human spirit" is fundamentally misconceived. Condemn the system, not the people trying to survive with their personhood intact.

Tom Hickey said...

Would that people were buying all that stuff for gifts. We'd be living in a gift economy. Maybe in your neighborhood, but not in most places with which I am acquainted.

And even the conventional gift-giving at holidays and social occasions has become way excessive in my view. Even many wealthy people who could afford to pay cash and not miss it did not engage in this type of conspicuous consumption not that long ago, feeling that those that did so were "nouveau" and boorish.

Nothing wrong with gifting or discretionary spending — within reason. But this cultural has gone crazy and a lot of it is the clever marketing and relentless advertising to create a culture of consumption. It is ruining kids, too, who have no sense of proportion, so when they get older they are used to over-consuming.

One of the problems arose with the massive extension of credit for consumption rather than investment. A few decades ago, credit was largely limited to investment and large purchase that needed to be financed like automobiles. Then it became durable goods, too. They anything that someone could put on a plastic card.

Excessive private debt that goes to consumption rather than investment is toxic. Bankers knew and understood this and when banks actually risked the capital of a single owner or a partnership, loans for consumption were pretty rare. when banks became limited liability corps run by managers and backed by government guarantees, implicit and explicit, then things went haywire as the economy became more and more credit-dependent.

Now everyone is looking at the credit figures to judge the recovery. In fact, the concern is that the formerly indefatigable American consumer has not come roaring back and we are years into this mess.