Minding the Markets: An Emotional Finance View of Financial Instability, David Tuckett, Palgrave Macmillan, Pp 232 (HB), $ 40
The financial crisis of 2008 has led to many words, sentences and writings but not enough has changed since then because of our failure to understand and organise markets in a way that can adequately control the human behaviour which financial trading unleashes.
This book, written by a British psychoanalyst who interviewed 50 asset managers in the US, UK and Singapore in an effort to understand the context of their decision-making, tries to make sense of the financial crisis and to offer ways to manage markets so far. It analyses the difference between the integrated state of mind versus the divided state of mind. He says that the former is “marked by a sense of coherence, which influences our perception of reality, so that we are more or less aware of our opposed ambivalent and uncertain thought and felt relations to objects.” By contrast the divided state of mind is an incoherent state of mind marked by the possession of incomparable but strongly held beliefs and ideas. The divided state of mind can be advantageous in certain circumstances – “the single-minded pursuit of a goal in a battle with no thought for the consequences, or creative endeavour with little thought for consensus thinking.” Generally however, “the pursuit of reward is tempered by the fear of loss, producing anxiety, which is a signal of danger.”
Tuckett argues that the financial marketplace accentuates rather than mitigates the human potential for developing divided state of mind. For one thing there is undue emphasis on short-term returns. Even if a fund’s investment horizon is three to five years, there is pressure to perform short-term. Short-term results are also the key in handing out bonuses. Moreover, firms “may disproportionately select excessive risk-takers and predispose markets to gambling based on thinking, rather than balancing risk and reward.”
Tuckett also finds that managers do not seem to approach failure in the integrated state of mind by using their capacity for enquiry to work through and learn from their mistakes. They do not mourn failure so to speak; rather, they seek to move on and fortify themselves for the next battle. This is what the divided state of mind enables a human being to do.
On reading this book one can see that there is plenty of economic research by George Akerlof and Robert Shiller, for example, on the psychology of market bubbles, but Tuckett’s insight, based on in-depth interviews with investors, each managing more than one billion US dollars, shows that stocks, shares and derivatives are a special kind of asset and decisions about whether to buy or sell them are particularly subject to stories and emotions. For one thing, the value of financial assets is prone to extreme uncertainty: thousands of improbabilities can affect the profitability of a company, for example, from the collapse of a key supplier to a sudden change in the cost of commodities to a natural disaster thousands of miles away. At the same time, the owner of a share, or a credit default swap, has nothing that he can eat, drink, live in or even hold in his hands; he has to weave a story, a narrative, even to understand why it’s worth buying the asset in the first place, let alone hanging on to it when its value has soared to once-unthinkable heights.
Tuckett offers a deep understanding of financial market behaviour and investment processes by recognising the role played by unconscious needs and fears in all investment activity. He lays emphasis on the importance of the critical components of human psychology.
(Palgrave Macmillan, Houndmills, Basingstoke, Hampshire RG21 6XS)
Love as the stuff of human effort
The Paradox of Love, Pascal Bruckner, Princeton University Press, Pp 272, $ 29. 95
Bruckner shows that love is the stuff of most novels, films and an awful lot of poetry. It’s the greatest thing, a many-splendoured thing, a four-letter word, a story older than the sea. It’s all around and in the air, which helps us little in pinning it down. Prince Charles who is seen in many ways a thoughtless man, was on to something when asked if he was in love with his first wife-to-be, he mused, “Yes, whatever that may mean.”
Novelist and philosopher Pascal Bruckner’s book is an account of the sexual muddles of our time. Paradox abounds in time like our own, when the didactic impulse chases after wisdom in every possible direction. “We have to find in the interminable non-resolution of (love’s) problems,” he writes, “the charm of a possible solution.” If only this was possible for mankind as a whole.
Paradox piles on paradox, but soon Bruckner gets down to realities. Adultery is a symptom, he says, of an individualist society torn between the ideal of fidelity and a thirst for freedom. But not everything fits into this tension between desire and restraint. “The vertiginous increase of divorce rates in Europe,” he tells us, “is not the result, as is often said, of our selfishness, bur rather of our idealism: the impossibility of living together, combined with the difficulty of remaining alone.”
In short, our sense of the “impossibility of living together’ is directly related to the freedom we pursue so heedlessly – at the expense, too often, of happiness, “the difficulty of remaining alone.” Bruckner points out a “new conformism that waves the flag of transgression in order to sing the praises of the status quo.” In the end, he wants to synthesise the stability of the past with some of the liberations of our own time and he ends with wise and familiar words: “Don’t allow yourself to be intimidated. There is more on the road to joy!”
Bruckner, a French thinker and author of this book claims he has mercifully never fallen for the post-structuralist poppycock that convoluted prose signifies complexity of thought. The book is in many ways a deconstructive take on our ideas of romance and desire and obsession, yet we tend to seek in vain in “its succession of suave pensees for a sentence that does not immediately make sense. Derrida’s obfuscation and Foucalt’s obscurantism can have us shouting at the walls.”
The reviewer can do nothing but to quote: “The couple is a little principality that makes its own laws and is constantly in danger of falling into despotism or anarchy.” This is subsequently followed by another statement like, “Lovers are simultaneously sovereigns, diplomats, parliament and people, all by themselves.”
This is a book full of ideas and it is a thesis. Far from liberating us, the author argues, “The accursed parenthesis of the 1960’s did no more than usher us into new jails – jails in which we are both prisoner and guard. We no longer refer to our ‘girlfriends’ or our ‘husbands’ preferring to talk of ‘partners’ as if they might one day be merged or even take over and yet we kid ourselves that we have banished the idea of marriage and a business contract. We have, we think, urged ourselves to the poetic fantasy of love as a wrenching, redeeming force and yet we expect our partners to be everything to us – loners, confidants, managers, secretaries, friends.” The result is not less but more pressure on the idea of the couple – so much so that we come to conceive of it as a self-determining republic, an arena of privacy in which the old Helen Reddy song about ‘you and me against the world’ suddenly makes sense.
Love has undergone a revolution in the sense that we now ask everything from love: “We ask too much of it; we ask what it ravish, ravage and redeem us. It is assigned such a grandiose ambition in no culture than in ours. Christianity’s invention of the God of Love has made the virtue of love the cardinal value of life.” Love has been raised to the pinnacle with varying outcomes, thereby proving that the sentiment can be “as dangerous as an explosive,” but by liberating itself, it reveals itself for what it is – noble and base at the same time.
(Princeton University Press, 41, William Street, Princeton, New Jersey: 08540; press.princeton.edu)
Late Roman empire in Rabbinic context
Rabbinic Texts and the History of Late-Roman Palestine, Martin Goodman & Philip Alexander (eds.), Oxford University Press, Pp 419, $ 115
The book contains revised versions of the papers presented at a conference held in March 2007 at the British Academy. Collectively these papers provide rich guidance to non-specialists regarding key developments in the scholarship of rabbinic sources then. The book is divided into three sections, where the first part contains five essays on several basic topics. Philip Alexander offers an overview on using rabbinic literature as a source for the history of late-Roman Palestine and its problems and issues. The Roman historian, Fergus Millar discusses the Palestine context of rabbinic Judaism. This section ends with an exchange between Peter Schafer and Chaim Milikowsky from the mid 1980s on the character of rabbinic texts and with Schafer advocating synoptic presentations of the multiple manuscripts of a given ‘document’ while Milikowsky argues that he sees no evidence of any significant variation in any of the classic works of midrash, neither included in the corpus of midrash halakkah nor those included in the corpus of midrash aggadah.
Part 3 expounds on the brief comments on the historical value of rabbinic texts containing more detailed essays on specific aspects of the history of the Jews and late Roman history.
This book brings together studies by experts in the rabbinic literature of late antiquity and by specialists in the history of the Jews in that period in order to reveal the value of rabbinic material as historical evidence and the problems and issues which arise in is exploitation. A substantial introductory section discusses the current state of knowledge about Palestine in this period and debates about the difficulties involved in editing and dating rabbinic texts. Specific core texts and text categories are then introduced to the reader in a series of ten discrete studies.
On reading the book, a natural question that arises in the mind is “of what use is rabbinic literature for the history of late-Roman Palestine?”
The rabbinic texts may be of little use, at least as compared with Greek and Latin sources, for political or administrative or economic or even social history, but they are a goldmine for the study of religious history – they are the richest surviving sources from the region and shed a flood of light on the inner workings of people’s imaginations, on world views, which may help to explain why they behaved as they do in everyday life.
(Oxford University Press, Great Clarendon Street, Oxford OX2 6DP)