The Simplicity of Complexity That Orders the Chaos

In hindsight, I view this post on the illusion of complexity the most important that I've written, primarily because it crystallized my thinking on the fractal nature of human cognition (and, more importantly, human action) and did so in a manner that tied it back to so-called "complexity."

NOTE: those links are to three different posts, the first being the most important and the other two putting stakes in the ground re: fractal cognition and complexity, respectively.

I think I can boil things down further.  My working theory is that the true elite (however you label them) are able to shape and control the illusory complexity of society by manipulating a very simple, fractal function that underlies how human beings make decisions and, therefore, act. I've described the base fractal function qualitatively numerous times in the past, including in all of the linked-to posts, above.  To understand how the same simple fractal function can lead to widely different results, see here.  You manipulate the human fractal through the social institutions that set societal values (i.e., the coefficients in the equation).  The founders of Neoliberalism understood this and set out to control those institutions.  And they succeeded.

My approach to reality forces me to look for the human fractal and its manipulation.  I can't help myself.  For example, whenever I see somebody boil down macro-politics to an either-or, binary choice, I usually confirm both the human fractal and its manipulation.  The fractal is apparent from the urge to drive certainty by limiting the available options to only two.  The manipulation of the function is apparent from the fact that the two options are both ALWAYS dictated by the manipulator.  How is that?  Because the manipulator defines the status quo, and the human fractal naturally creates the opposite of the status quo through the process of normative inversion.  

Another way of getting at what I am trying to say is that if you use their frame, you will lose the game.   An example of this phenomenon may be found here.

What I ultimately hope to accomplish through The Project is to articulate the human fractal in a way that everybody will understand.  Anybody who comes to understand the human fractal can manipulate those who don't and, at the same time, avoid being manipulated.  If EVERYBODY understands the human fractal, NOBODY can manipulate or be manipulated.  My goal is to make sure that everybody gets it.

Change the frame.  Change the game.  Don't get suckered into fighting power with power.  Knowledge trumps.  That's why we're taught to avoid it.

Economic Theory Is a Pathological Lie Carefully Constructed to Normalize Evil

Earlier today I was pushed by a regular correspondent and reader of my blog to explain my position regarding malinvestment more fully.  I always appreciate this person's insights and probing, and this time it is no different.

From the first e-mail:

You have written a few times, regarding malinvestment. From its common usage, I think malinvestment is thought to mean investment outside a competitive dynamic, where price discovery should be allowed to match supply with demand and malinvestment inhibits that process.

I incorporated my initial response as the update to this post from earlier today.  This prompted another email asking for further clarification and providing what I think is fair (and constructive) criticism.  Here are the two most important paragraphs, which have prompted this more open discussion:

If inclined, you might consider a post, with strong references, supporting your claim, the contents in the last email. This has been a central tenet of yours, I have noticed. Before, I was not sure how to understand it, because of the use of "malinvestment" throws a monkey-wrench into the equation, for me. You should understand that this view and some (some) of your views, although nuanced, complex and perhaps correct, I believe, are somewhat esoteric, eclectic, if not inaccessible or technical.

. . .

Your email reply, as it is written is clear. It is just the thesis is unusual. Perhaps that is what you might think legitimizes the position. However, without context or without some corroborating analysis, its form is un-integrable, I believe; or, it has a myriad of problems for various people.

I think the title of this post nicely brings my thesis "right down to earth in a language that everybody here can easily understand," as Malcom X once said. 

A Quick Disclaimer

Before I get rolling, I want to make clear that I don't believe that economic theory must always be a pathological lie.  I believe it is possible, in theory, to develop a mathematical model that accurately reflects how the economy really works.  Indeed, some have argued that people like John Maynard Keynes and Hyman Minsky have already done so, and Steve Keen and other Post Keynesians continue to build on their work, the bulk of which has been ignored by the Chicago and Austrian schools, among others.

Unfortunately, as a practical matter, I believe it is impossible to overcome the underlying political nature of economics (which used to be called "political economics") and the interests that economic discipline serves (i.e., the "rentiers" that were disappeared from economic discussion by the creation of neoclassical economics as an answer to Henry George's criticism of classical economics).  What history has shown us is that the fallacious mathematical models of economic theory are never replaced with accurate models.  At best, additional fallacious mathematical models of economic theory are layered onto the old ones, often while claiming that the new models incorporate the theory of a critic while not doing so at all (e.g., the so-called Keynesian-neoclassical synthesis and the later Neo-Keynesians and New Keynesianism).  At worst, criticism of the fallacious mathematical models of economic theory are used elsewhere in the socio-political arena to persuade the masses that the mathematical models are not, in fact, fallacious but sound (e.g., applying Gunnar Myrdall's insights to form neoliberal social institutions that turn citizens into sociopaths). ** Due to the political forces at work, economic theory will always be a set of  clothes tailored for a non-existent emperor. 

Explaining My Thesis By Breaking It Into Its Constituent Parts

Now, let's break the title of this post into its constituent parts:  economic theory is (1) a pathological lie (2) carefully constructed to normalize "evil."  As to the fallaciousness of mathematical models in economics, people like Steve Keen have done a great job of explaining how the math of orthodox (and related heterodox) economic theory doesn't work.  See here, here and here.  The first link is to a blog post that links to complete set of lectures and video/audio of a course he taught in behavioral finance.  Highly recommended.  The second link is to his book at mobi.com (superior PC-based reader to Kindle's), and the final link is to supplementary material for the book and includes additional lectures. 

Of course, the fact that the mathematical underpinnings of economic theory are provably false does not make economic theory a "pathological lie."  No, what does that is the fact that economists persist in perpetuating the falsehoods while knowing that they are, in fact, a falsehoods.  This one place where I break from Keen, who views his fellow economists' behavior as irrational and "mad", primarily because he incorrectly believes that his profession exists to explain the world as it really is when, in fact, it exists as a propaganda arm of rentier interests to rationalize their behavior as just the magical market doing its work.  In this sense, as I've noted elsewhere (and here, too, I believe), economics codifies-- in very different terms-- a modern version of feudalism's "divine right of kings": the wealthy are wealthy because the market chose them as winners.   The recasting of the divine right of kings in "free market" terms is particularly evident in Hayek's conception of the market, which forms the cornerstone of neoliberal economics and policy in both the Chicago and Austrian schools of economics.

If you can agree that the repetition of a known falsehood as the truth is, in fact, a lie, then I don't need to prove that the lie is, in fact, pathological.  Indeed, my assertion as a whole is that "economic theory is a pathological lie carefully constructed to normalize evil," but the definition of "pathological" implies that the lie is involuntary or compulsory.  The fact is that I chose the term "pathological" to refer to the effect of economic theory on society as a whole rather than to describe the mental state of economists and others who repeat the lie, many of whom do so earnestly and honestly.  As I've stated here and elsewhere, I believe a direct consequence of neoliberal economics and policy is a society of sociopaths, i.e., individuals without a conscience.  This was the entire point of mangling Smith's Invisible Hand.

Turning to the assertion that the pathological lie was carefully constructed to normalize evil, I have several posts that discuss the history of the neoliberal political movement, including who was behind it, how it was initially constructed and how it morphed over time.  Generally, you can find these posts by looking for the "Neoliberalism" label, but good examples can be found here, here and here.  You can also see Robert Vienneaus's thoughts on Milton Friedman, the Austrians, and some of the problems with certain aspects of economic theory.  Robert is a non-economist economist who earnestly and in his own way is marching on the same path as Steve Keen trying answer bad math with good math.  I cannot say that I agree with everything he says, but that's because I have not read everything he has said.  I believe he is a computer scientist by profession, which probably explains why he and I (trained in CS/EE) arrived at many of the same conclusions regarding neoliberal (like everybody else, he calls it neoclassical) economic theory.

I cannot expect anyone to merely accept my conclusion that economic theory is a purposeful lie, but I think a careful reading of history, on the one hand, and the huge known disparity between economic theory and the reality it supposedly describes will convince everyone of good conscience that this didn't happen by accident.  Neoclassical economics was created to avoid the valid criticisms of Henry George, who first identified debt-financed speculation as the true cause of industrial depressions in the late 19th century.  The neoclassical-Keynesian synthesis, New Keynesianism and Neo-Keynesianism all purported to adopt and follow Keynes when, in fact, all of them disappeared the part of Keynes' General Theory that would euthanize the debt-financed speculator (i.e., the "rentier").  Neoliberal Chicago School economics were on hand and at the ready to take over when "Keynesianism failed," as it did when, according to Hyman Minsky, debt-financed speculators created the "stagflation" phenomonen, something that had only been theorized by a Chicago School economist shortly before the theory, which made no sense on its face, became reality.  And then there's the Chicago School's theories of finance, the effect of which was to financialize the real economy in its entirety, allowing the debt-financed speculators to blow bubbles in all asset classes, not just in land, as was the case in Henry George's day.

My conclusions regarding the true nature and purpose of economic theory are based in part on my professional experience in negotiating complex and difficult deals, which often devolved into litigation.  These negotiations had an average duration of 18-24 months, typically involving a lot of travel and many meetings internally and with the other side.  In several cases, hundreds of millions of dollars were at stake.  One of the things the experience taught me was to pay careful attention to what the other side actually did and compare it to what they claimed they were going to do.  Trust but verify.  I discovered that whenever there was a significant difference between the two, the other side was lying.  Plain and simple.

Turning Back to the Correspondence that Prompted This Attempted Response.

Recapping:

You have written a few times, regarding malinvestment. From its common usage, I think malinvestment is thought to mean investment outside a competitive dynamic, where price discovery should be allowed to match supply with demand and malinvestment inhibits that process.

I've highlighted the phrase "competitive dynamic" because that's a term that applies to capitalism, but what we currently practice-- thanks to neoliberal economics and its neoclassical foundations-- is not capitalism but what I've started calling "financialism."  As I stated previously here:

If competition were good for the economy, we'd have it.  We don't.  The reality is that competition is BAD for a financialized economy because real competition disrupts the illusion of perpetual growth that makes the FIRE sector a lot of money.  J.P. Morgan realized in the late 19th century that competition is bad for business, if you're an investment banker.   Monopoly is a feature of neoliberal policy.

What did I mean by this?  As I explain here, although not in precisely the same terms, finance drives economic decisionmaking by firms because firms are managed to meet the expectations of CAPM financial models that express the stock price of a company in terms of its future cash flow according to its balance sheet.   That is, corporate executives don't manage their businesses to maximize profits, they manage their balance sheets to simulate a financial instrument that, on a quarterly basis, demonstrates an exponential and perpetual increase in value at a rate faster than inflation. Yet another way of putting it is that corporations are managed to maintain the illusion of a bond having infinite duration that perpetually compounds interest at a rate faster than the rate of inflation.  Why?  Because of the incentive structures provided to executives, CAPM is not merely descriptive but is actually normative.

Steve Keen's lectures on behavioral finance explain the economic hierarchy quite well: microeconomic theory supposedly models the behavior of consumers, individual firms and their respective aggregating industries; macroeconomic theory supposedly models how these various industries and consumers interact in the larger economy building, of course, on microeconomic foundations; and finance supposedly models the value of firms by building on macroeconomic foundations.  If microeconomic theory fails, so does the entire edifice of economics fails as the hierarchy is flattened down into finance.

As Keen discusses in the first few lectures of his course, a fundamental assumption of microeconomics is its theory of the firm in which every firm is managed to maximize profits.  As discussed above, this assumption is false.  (FYI -- Keen uses math to debunk the neoclassical theory of the firm, but his math starts from the same basic starting point as what he is debunking without recognizing that finance is normative).  

How did I reach the conclusion that finance drives corporate decision-making?  I used to be an executive at a public company, and there were several instances during my career working in corporations (starting with Intel) where I was struck by economic decisionmaking that was driven primarily by the balance sheet and not by actual cash flow (i.e., profit maximizeing) concerns.  At the time, I really did not understand why this was the case, but as I taught myself finance and valuation theory in order to contribute to discussions regarding M&A etc., I learned about the models that analysts used to estimate the value of our company.  Still, it took another year of studying economics (and the economic history of the United States) outside of the corporpate environment to understand the implications of CAPM on the real economy and on economic theory, as well.  If you understand net present valuation methodology, you'll quickly recognize that the rules of that methodology (e.g., the selection of the discount rate, growth assumptions, terminal value, etc.) ultimately express the value of the firm as bond of infinite duration that exponentially grows in value over time.  If you accept that providing executives incentive stock options and restricted shares aligns their interests with those of the shareholder, which is to have a financial asset that grows in value infinitely and perpetually at a rate greater than that of inflation, then you should have no problem in accepting my conclusion that financial theory is normative, not merely descriptive.  FYI -- I have recently discovered that there is some literature on this topic.

Recapping the follow-up correspondence:

If inclined, you might consider a post, with strong references, supporting your claim, the contents in the last email. This has been a central tenet of yours, I have noticed. Before, I was not sure how to understand it, because of the use of "malinvestment" throws a monkey-wrench into the equation, for me. You should understand that this view and some (some) of your views, although nuanced, complex and perhaps correct, I believe, are somewhat esoteric, eclectic, if not inaccessible or technical.

. . .

Your email reply, as it is written is clear. It is just the thesis is unusual. Perhaps that is what you might think legitimizes the position. However, without context or without some corroborating analysis, its form is un-integrable, I believe; or, it has a myriad of problems for various people.

I admit that my explanation of my thesis, which can be summarized into a pithy ad hominem attack on economic theory as a whole, is nevertheless difficult to explain without resorting to an explanation of concepts that are foreign to most people.  Here's the problem, and it's something that I learned a long time ago: the person who determines the starting assumptions of a debate usually wins the debate.  To start by assuming that economic theory is right and trying to explain why it is wrong is a losing proposition because economic theory is based on centuries of layered lies, and attacking all of the lies (as people like Keen tend to do) makes you look weak: if you had a killing blow, you'd deliver it and not seek the death of your foe by a thousand cuts. 

I think my insight about finance as normative can be developed into a killing blow, but it still needs further work to persuade the masses who are stuck with iconic words and useful fictions inflicted on them by neoliberal social institutions that sprang into existence to put the insights of the rival institutional economists and neutral cognitive scientists to work to their advantage (e.g., neoliberal think tanks construct their policy messaging by applying Kahneman's Prospect Theory, even as neoliberal economists construct their policy messaging by applying Benthamite Utility Theory; not surprisingly, both reach the same conclusion, even though Prospect Theory is based on empirical evidence that proves Utility Theory to be wrong).

In the meantime, I'll stand on my outright rejection of economic theory as politics, something that categorically cannot be integrated into people's current understanding of how the world works.  I fully understand how people are most persuaded by things that seem to confirm what they already know, but that's not the route I plan to take because cognitive biases tend to smudge important differences out of existence, much as an eraser smudges graphite off a sheet of paper.  Sometimes you need to challenge first, then engage.

Anyway, thanks go once again to my email buddy for prompting me to attempt to explain my thesis in one place, and apologies for probably failing in my first attempt.


**FYI -- I have a working theory that the Nobel Prize in Economics is awarded based primarily on the extent to which a recipient advances rentier interests in applying economics as a control mechanism over the masses, regardless of whether the recipient purposefully set out to do so.  Gunnar Myrdal (an institutional economist and critic of neoclassical theory) and Daniel Kahneman (a cognitive scientist whose Nobel prize-winning work forms the basis of behavioral economics) are two examples of unwitting participants.

Behavioral Economics and Being Rational (or Not)

Yet another "reposted" post from the old blog.  It basically riffs on how the term "utility" has become iconic, particularly in the political economy profession.

Behavioral economics is a field that has gained a lot of attention recently through the publication of easy reads like Predictably Irrational and Animal Spirits that feature the discipline, as well as by other books that discuss the findings of studies either conducted by behavioral economists or relied upon by behavioral economists to support their conclusions.

A central question of behavioral economics is whether human beings are rational. To answer that question, behavioral economists draw heavily upon experiments conducted by psychologists and cognitive scientists.

Behavioral economists start with the assumption that neoclassical economic theory is fundamentally correct but can be improved through understanding how human beings actually make economic decisions. Staring at the experimental data through this neoclassical lens has led them to conclusions about the rationality of people instead of conclusions about the rationality of neoclassical economic theory. To borrow one of their own observations and apply it to them, framing the problem as "how to improve" neoclassical economics has affected how they approach solving it. Very convenient. And very self-unaware.

The crippling flaw of neoclassical economics that limits the promise of behavioral economics is the belief that human calculations of utility are defined solely by economic (i.e., pecuniary) value. It turns out that this may actually be a "feature" of neoclassical economics instead of a bug because this view actually refutes a fundamental belief of institutional economics, a school of economic thought that was dominant when neoclassical economics first arose. Institutional economists believed that economic decisions are necessarily affected by social and political considerations. That is, individuals calculate utility by considering social value and political value, not just pecuniary value. Adam Smith was of the same mind and said as much in The Wealth of Nations.

This unfortunate feature of neoclassical economics has led to the conclusion that human beings are not rational, at least with respect to economic theory. That conclusion is, in fact, wrong and points out a level of irrationality on the part of behavioral economists that is not present in the underlying experiments.

Let's start with a reasonable definition of "rationality:"

Rationality can be a difficult word to define-it has a long and convoluted intellectual history-but it's generally used to describe a particular style of thinking. Plato associated rationality with the use of logic, which he believed made humans think like the gods. Modern economics has refined this ancient idea into rational-choice theory, which assumes that people make decisions by multiplying the probability of getting what they want by the amount of pleasure (utility) that getting what they want will bring. This reasonable rubric allows us all to maximize our happiness, which is what rational agents are always supposed to do.

How We Decide, Jonah Lehrer

Now, let's take a look at a couple of economists who looked at the seminal work of Kahneman and Tversky, which is part of the foundation of behavioral economics, and concluded that human beings are irrational:

“[S]uppose you offer somebody a choice: They can flip a coin to win $200 for heads and nothing for tails, or they can skip the toss and collect $100 immediately. Most people, researchers have found, will take the sure thing. Now alter the game: They can flip a coin to lose $200 for heads and nothing for tails, or they can skip the toss and pay $100 immediately. Most people will take the gamble. To the imagined rational man, the two games are mirror images; the choice to gamble or not should be the same in both.  But to a real, irrational man, who feels differently about loss than gain, the two games are very different. The outcomes are different, and sublimely irrational.

The (Mis) Behavior of Markets: A Fractal View of Risk, Ruin And Reward, Benoit Mandelbrot and Richard L. Hudson

“Imagine that a rare disease is breaking out in some community and is expected to kill 600 people. Two different programs are available to deal with the threat. If Program A is adopted, 200 people will be saved; if Program B is adopted, there is a 33% probability that everyone will be saved and a 67% probability that no one will be saved.

Which program would you choose? If most of us are risk-averse, rational people will prefer Plan A's certainty of saving 200 lives over Plan B's gamble, which has the same mathematical expectancy but involves taking the risk of a 67% chance that everyone will die. In the experiment, 72% of the subjects chose the risk-averse response represented by Program A.

Now consider the identical problem posed differently. If Program C is adopted, 400 of the 600 people will die, while Program D entails a 33% probability that nobody ill die and a 67% probability that 600 people will die. Note that the first of the two choices is now expressed in terms of 400 deaths rather than 200 survivors, while the second program offers a 33% chance that no one will die. Kahneman and Tversky report that 78% of their subjects were risk-seekers and opted for the gamble: they could not tolerate the prospect of the sure loss of 400 lives.

This behavior, although understandable, is inconsistent with the assumptions of rational behavior. The answer to a question should be the same regardless of the setting in which it is posed.

Against the Gods: The Remarkable Story of Risk, Richard L. Bernstein

There is no way that a rational person can conclude from this experimental data that human beings are irrational. The experimental data show merely that (1) human beings exhibit loss aversion, i.e., a strong bias against losing what they have, and (2) that bias can be manipulated by how a problem is framed. Unfortunately for Mandlebrot and Bernstein, the expected economic values, i.e. the utility, of the risk-taking choice and the risk-avoiding choice that were presented in each question were identical.  Since both choices in each version of the problem resulted in maximum utility, the choice to embrace or avoid risk was of no consequence, at least not from an economic point of view.  Clearly, loss aversion affects the amount of risk that somebody is willing to embrace, but doesn't that tell us that happiness (aka utility) is defined by something more than just economic value?  And, just as clearly, how a problem is framed can affect the choice between embracing and avoiding risk, but doesn't that tell us that context matters, that individual economic decisions are indeed influenced by institutional factors?

Nevertheless, two very smart economists viewed the data and concluded that it proved human beings were irrational. How could that be?  It seems like there was a bit of bait-and-switch going on.  While economic theory describes rational behavior as acting to maximize one's happiness, Mandelbrot and Bernstein seemed to define rational behavior as solving equivalent problems identically.  The logical fallacy here is that problems that are "equivalent" in terms of expected economic value are not necessarily identical in terms of utility, but to recognize that, you must first question the neoclassical assumption that utility is determined solely by economic value.  Unfortunately, it is much easier to accept that human beings are irrational than it is to question the Useful Fictions through wich you understand the world. This is just another aspect of human decision-making, which is characterized by positive feedback, hysteresis and metastability.

NOTE: It is not so much that Mandelbrot and Bernstein are irrational, it is that they point out one form of bias (loss aversion) as establishing that human beings are irrational while ignoring the fact that they could not have arrived at that conclusion without their own bias (confirmation bias). The facts they relied upon simply provide no support for their conclusion.

When Words Become Icons

The following is another post that I removed when I repurposed the blog.  I didn't realize at the time that I was describing a form of known cognitive bias that arises through the use of heuristics.  I'm reposting it now because it is related to a post that I am composing at the moment.

John Maynard Keynes from his Preface to The General Theory of Employment, Interest and Money, dated December 13, 1935:

The Composition of this book has been for the author a long struggle to escape,and so must the reading of it be for most readers if the author's assault upon them is to be successful,- a struggle of escape from habitual modes of thought and expression. The ideas which are expressed so laboriously are extremely simple and should be obvious. The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been into every corner of our minds.

One aspect of Useful Fictions that I have yet to touch upon is the effect of changes to the usage and meaning of key words and phrases on the application of Useful Fictions. A key aspect of "habitual modes of thought and expression" is the assumption that the meaning of words and phrases are immutable, that they mean what they think we mean. But the fact is that the meaning of words and phrases-- particularly politically charged ones-- morphs over time, particularly in our sound-bite cultural. For example, "socialism" does not mean today what it meant in the times of Marx, Hayek and Arendt. Such politically-charged terms have become what I call "iconic:" they are designed to illicit negative, emotional reactions, not to be descriptive or accurate.

But that's a topic I'll flesh out later.

How My Current Journey Began

Below I repost my very first blog post from over a year ago, which I pulled down when I repurposed and relaunched the blog to focus primarily on economic issues.

When I started out back in late 2008/early 2009, the economy was not even on my mind.  I was looking to escape the corporate world, and to accomplish this I was developing a new business model more consistent with what I want to accomplish in life.  (In one of his videos, Damon Vrabel talks about how corporate execs are trained to think of sabbatticals as the time you spend thinking about what you're going to do next to make money; that's where I was at the time, on sabbatical thinking about my next gig.)  I have not given up on this idea, but I view the approach as an adjunct to more important things to do.

Useful Fictions: On the Models That We Use to Interpret Our World

One of the primary goals of my side project (hereafter, simply “the Project”) is to use entertainment to encourage critical thinking and meaningful discourse by the audience. I say “encourage” because (1) not all human beings are predisposed and/or interested in engaging such thinking and (2) if you are too aggressive, it will stop looking like entertainment and starts looking like a sermon. Since my focus is to promote a process and not any particular outcome of that process, seeming “preachy” would entirely defeat my purpose.

As I will detail in future posts, there are multiple obstacles to achieving this particular goal, but the most imposing is what I have come to call “Useful Fictions,” which are the models of the world that we have developed and/or adopted to help us make sense of the world. All of us rely on such models, although the vast majority of us are not conscious of that fact. Many have recently commented on this phenomenon (although not using the “Useful Fiction” label), including Nassim Nicholas Taleb in The Black Swan (2007), Michael Philips in The Undercover Philosopher (2008), Jonah Lehrer in How We Decide (2009) and George Cooper in The Origins of Financial Crises (2008). Most of the commentary is phrased in psychological terms as most of the research into the phenomenon has been conducted by psychologists and cognitive scientists. I prefer my construct because it is free of any judgment of the rationality of human beings. Besides, I came up with it before discovering the work in the area, and it is more consistent with the goals of the Project.

What makes Useful Fictions such a thorny problem is that our widespread and unrecognized reliance on them prevents critical thinking from the get-go. Most of us are far more interested in confirming what we think we already know—our models of life, if you will—than we are interested in questioning it. And with the explosion in the availability of information (both processed and unprocessed), much of it seemingly contradictory, Useful Fictions become even more important for many of us to help us make it through the day. Indeed, I blame the amazing advances in information technology as the primary driver behind the rise of religious fundamentalism around the world and the “conservative” movement in the U.S., two examples of people running towards unswerving certainty in the face of uncertain times.

Like any model, every Useful Fiction is subject to boundary conditions beyond which the assumptions of the model break down. Unfortunately, because we are (1) largely unaware that we rely on Useful Fictions and (2) we intuitively seek to confirm our Useful Fictions, we are completely oblivious to when our Useful Fictions become non-functional, which at best makes our Useful Fictions useless and at worst makes them harmful. Taleb’s “Black Swans” often arise because commonly-held Useful Fictions break down.

So, if your goal is to encourage critical thinking, how do you successfully get past Useful Fictions when they exist precisely to avoid the need to engage in critical thinking? Frankly, I don’t have a complete answer just yet. I do believe that fiction has to be the avenue for accomplishing this goal because people process fiction differently than facts, they’re more likely to take it at face value than spin it to match their expectations.

It is ironic that human beings tend to be more accepting of fiction than we are of facts, but that’s the case. For proof, you need look no further than the impact of The Da Vinci Code on Christianity generally and Catholicism specifically. That work of fiction (which I thought was pretty horribly written), had more impact on some people's faith than the rise of Dawkins et al.'s neo-atheist movement ever will. Why? Because fiction invites the willing suspension of disbelief but does not challenge the beliefs you already hold, so no defenses are raised in response. Ayn Rand's Atlas Shrugged is an example of how fiction can be purposefully used to advance an ideology. I think that both Dan Brown and Ayn Rand were dishonest in their approach-- Brown because he presented fiction as if it were fact; Rand because she disguised her philosophy as fiction. I don't want people to change their minds but rather open them.