Economic Policymakers Should be Required to Study Behavioral Psychology

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Dear Friends:

Every economic policymaker should be required to study Behavioral Psychology. Recent monetary and fiscal moves by the government of the United States in response to its severe domestic economic recession have lead many in the International Community to wonder if the folks at the Fed, the Treasury Department and the Oval Office missed one too many classes in either history or behavioral psychology. Perhaps both.

Please read the following, excerpted from the Washington Post, by way of BuzzFlash:

Bailout Overseer Says Banks Misused TARP Funds
www.washingtonpost.com/wp-dyn/content/article/2009/07/19/AR2...sent by etspoon since 17 hours 11 minutes, published about 4 hours 10 minutes
"Many of the banks that got federal aid to support increased lending have instead used some of the money to make investments, repay debts or buy other banks, according to a new report from the special inspector general overseeing the government's financial rescue program. The report, which will be published Monday, surveyed 360 banks that got money through the end of January and found that 110 had invested at least some of it, that 52 had repaid debts and that 15 had used funds to buy other banks."-- Binyamin Appelbaum, Washington Post Staff Writer
tags: banks, bailout, criminality

My comment in response:
There is a terribly large "blind spot" in government policymaking. It is in the area of intersection between economic fixes (bailouts, awards, "infusions," which latter term is my favorite) and behavioral psychology. If you drop a large sum of money in a profligate child's lap, especially after he has proven himself to be a naughty bully as well as a terribly greedy and short-sighted lout, he will see it as encouragement (my more articulate colleagues would call this "positive reinforcement"). If you then fail to attach very specific terms and conditions to the use of that sum -- like, by way of example, making loans to consumers and the businesses that employ them -- as well as the clear and enforceable threat of substantial punishment for noncompliance, you've given the profligate more than just a gift; you have given him a gift at the expense of every consumer, every business and every taxpayer in the entire economy. Every so often, one of the government's policy pundits has to repeat the silly exercise of trying to put out a fire by pouring gasoline on it. And, invariably, he is compelled to do it in someone else's house. --DC

Faithfully,

Douglas Castle




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THE CASE FOR CITIZEN AMBASSADORS

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Dear Friends:

The U.S. government has been fighting a moral battle within its own ranks about many things:

1. What to do about a flagging domestic and worldwide economy...hearing petitions for bailouts from industry groups and institutions and trying to determine what action to take; this involves a great deal of time, a fight against legislative inertia, a fear regarding public opinion, a propensity to yield to the pressures which all too often precede putting a bandage on a cancer, and numerous other Hobson's choices in the interest of polishing a pile of compost. Sadly, many of these decisions will result in even greater problems for the country's future, including continued inefficiencies, inflation and the creation of a "corporate welfare state."

2. What to do about the detainees at the Guantanamo Bay prison facility, many of whom have been held without formal charges or any form of "due process" since the terrorist attacks on the United States of 9/11. Many of these individuals may well be completely innocent of any offense, but they were unfortunate to get caught in the net of braod fear and paranoia that possesses a country under attack. Part of the government believes that these people have been denied any type of rights, recourse or remedies -- they have been captive for more than six years without being formally charged and without an opportunity to present their case -- while another branch of the government insists on keeping these "detainees" (calling them "prisoners" might entitle them to certain constitutional and civil rights) locked away while appealling the decision of the other branch (in this case, the judiciary) that these people be treated as people, and released immediately. The detainees are the ultimate victims in a battle between two branches of the same goverment which are unable to reach an agreement. And the years go on...

Governments cannot solve many problems. When they attempt to intervene, the "cures" prescribed are often worse than the diseases. When proper decisions are made in a rarity of cases, these decisions or their implementation comes far too late -- not unlike liberating the prisoners in a concentration camp after they have been malnourished too long to survive.

As citizens of our respective countries, and as citizens of the Internationalist Community, we are unfettered by the mindset, malaise and politics which keep governments from "fixing" the problems of peoples and commerce.

We are called upon as Citizen Ambassadors to create change and to solve problems as individuals, in cooperation with other individuals, and to form teams which transcend geological barriers and isolationist traditions in order to implement solutions. We need to be partners. We need to become team participants. We need to organize and to implement with humanitarian and entrepreneurial efficiency.

We cannot leave our salvation to highly compromised governmental bodies which move at a glacial pace and ultimately shoot at flies with cannons.

Faithfully,

Douglas Castle, Internationalist