Real Change Rational Choices in an Irrational World
When President Barack Obama touted “Real Change That We Can Believe In”, as the central message of his presidential campaign, he was talking about moving power away from the Washington lobbyists and power brokers and making government more responsive to everyday people. But the general publicyou and memust have the tools to be able to take back our power, in order to respond to his message.
What underlies that ability is how to make rational choices in a fast changing world, a world so complicated that it is no longer easily described, or even seems rationali.e., understandable to ordinary people. Behavioral economists in particular, as well as psychologists and sociologists have focused on the irrational behavior of individual market playersthose who would invest in housing, for instance, or the stock market at the height of their respective bubbles.
But I choose to believe it is the surrounding world, and the world of finance in particular, that has become irrationally complexat least beyond the comprehension and understanding of even current economic theorists and policy makers. Individual players may be making the most rational choices they are capable ofeven the expert traders. They can control their choices, but not their environment which may have those extraordinary “Black Swan”, once in a lifetime events, such as the Great Recession we have just experienced.
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