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Irrational animus?

By razib on March 17, 2009.

A lot has happened since the mention of the AIG bonuses yesterday on this weblog. The media is overflowing with stories on it, and people are frothing with rage from high to low. In the age when many people are becoming aware of the power of "animal spirits" and the economic irrationality which emerges from psychology, it seems like we've swung to the other extreme from exuberance. In fact, swung might indicate a smooth continuity which just doesn't reflect reality, rather, the mental state of the populace has snapped. I was IMing with a friend who has been abroad for the past 3 months, and I asked him to guess the unemployment rate in his home state of California. He paused for a long time and said "7%". He was shocked when I told him that it was ~10%, and that the national rate was ~8% (he's been kind of off the grid). We won't hear demands for higher tariffs from the pitchfork wielders anytime soon hopefully....

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I think it was John Tooby who wrote that "outrage" is the natural human reaction to (a) being in a perceived weak group that is (b) being attacked by a stronger group.

If so, then outrage is the natural emotion for people who hear of the AIG bonuses.

We have little bargaining power with these people. Additionally, they are profit-maximizing, trying to take as many of our resources as possible.

Of course, in absolute terms this is just .1% of the money we gave AIG. But in the same way, more people died of traffic fatalities in 2001 than in 9/11. The difference is that 'natural' causes are unable to increase their demands or bargain if they see our weakness, while 'outrageous' causes are.

I came up with a model of this kind of stuff we're seeing, before I started looking into economics, Shiller's book, etc. (So it's more general.)

The key is that, unlike most epidemic models, mine makes each transition between stages contagious. In epidemic models, the only contagious transition is going from susceptible to infected. Mine shows that the backlach, counter-revolution, panic, etc., are also contagious.

Can we have something on altruism and punishment? The New Yorker is doing it.