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  Hurricane Irene   Stock Market Chart

Between Hurricane Irene and the stock market volatility, I cannot help but to reflect on how we, as humans, prepare for and deal with threats and disasters.

 

The Blame Game
September 2, 2011

As my friends and family clean up in the aftermath of Hurricane Irene and I read about the discussions that recently took place at the central bankers’ conference in Jackson Hole, Wyo., I cannot help but reflect on how we, as humans, prepare for and deal with threats and disasters.

As a young management professor I studied the different ways people process bad outcomes, depending upon whether they believe these outcomes were caused by humans or Mother Nature. If we interpret that an unfortunate event was caused by nature or chance, we react with more understanding, patience and generosity toward others than if we think human action (or inaction) caused the negative outcome. Study after study shows that once human blame is assigned, people tend to become much more impatient and punitive, and less altruistic. Consider, for example, how there was no large-scale effort to collect donations for people who lost their homes in the subprime mortgage crisis, but we frequently see such fundraising efforts after crises such as Hurricane Katrina.

Now the one variant on this tendency occurs when the human cause is a shared large, external human threat, as was the case with 9/11. In this situation, the wreckage and lost lives that resulted from a large-scale terrorist attack evoked sympathy similar to a natural disaster. That’s also the logic conveyed in Orwell’s 1984. Large-scale, common enemies can unify human action.

The interesting thing psychologically is the issue of perceived controllability. When bad things happen, the human psyche is driven to explain the cause. When the cause is psychologically assigned to a human source, we believe the event was controllable. We think that somebody somewhere could have and/or should have behaved differently.

The fact that the press, and purportedly the markets, put so much weight on small words in certain speeches as predictive of the future is intriguing. Though it may occur frequently in our complex, global markets, “tea-leaf” reading of speeches is not rational scientifically. It reminds me of early man seeking to explain how to make the sun rise, what dance moves make the rain come, and what burial routines ward off evil spirits . . . .

As humans, we need to release some of our 21st century hubris and remember that we still don’t know everything about how the world works. In particular, we don’t know for sure how markets work now that they’ve reached this interconnected, global scale. We each need to rise above our animal spirits and become more comfortable with the one known absolute truth: The future is uncertain. And the answer to how, why and when the current global market volatility will end is unknown — just like the path of Hurricane Irene was before it hit U.S. shores.

I welcome your comments, feedback and ideas at sallyblount@kellogg.northwestern.edu

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