Sunday, March 22, 2009

"The Money Becomes Purely Symbolic"

Michael Lewis:

To the political process all big numbers look alike; above a certain number the money becomes purely symbolic. The general public has no ability to feel the relative weight of 173 billion and 165 million. You can generate as much political action and public anger over millions as you can over billions. Maybe more: the larger the number the more abstract it becomes and, therefore, the easier to ignore. (The trillions we owe foreigners, for example.)

The ability of the human mind to grasp large numbers is an interesting subject. In When Money Dies (pdf here) Fergusson mentions "the delirium of milliards," a reference to the limits of numeric cognition:

“The delirium of milliards [i.e., billions]” was a phrase of Foreign Minister Walter Rathenau’s coining. “The majority of statesmen and financiers think in terms of paper,” he wrote. “They sit in their offices and look at papers .. and on those papers are written figures which again represent papers. A milliard comes easily and trippingly to the tongue, but no one can imagine a milliard. Does a wood contain a milliard leaves? Are there milliard blades of grass in a meadow?”

Part of the reason 1923 was a seminal year in Germany was because it ruptured the natural boundary between the tangible and the abstract. "Millions" and "billions" became part of everyday life, the numbers indistinguishable from each other and essentially meaningless beyond how many eggs a new, larger number would buy each day. Recall Thomas Mann:

The market woman who demanded in a dry tone "one hundred billion" mark for a single egg had lost during inflation her ability to be amazed at anything. Since that time nothing was so mad or so atrocious that it could have caused any awe in people anymore.

Canetti took this a step further. He argued that the "delirium" infected psychology on both a national and individual level, and suggested that it paved the way for mass atrocities by making large numbers -- removed from their underlying reality and therefore their consequences -- routine in the bureaucracy. The broader effect was a sort of culturalization of fiscal values. It's an interesting theory. Hitler's speeches and Nazi literature in general -- starting with "a thousand years" -- were peppered with the language of large numbers. Germans found it mesmerizing and, propitiously for the Nazis, abstract.

It took years for the psychological damage of 1923 to become obvious. As millions and billions and trillions get batted around casually in the context of a similar national trauma, we'll see what else becomes "purely symbolic" and "easy to ignore" down the road.

9 Comments:

Blogger Mr. Hedley Bowes said...

My six year old recently asked me how much a googleplex was worth (in dollars, as he is fascinated by money) then after I explained it, he asked me how much a googleplex googleplex was worth.

3/22/2009 6:59 PM  
Anonymous Goldhorder said...

Ummm....we seem to have completely blocked out the destruction of Iraq...not that Arab life means anything.

3/22/2009 8:05 PM  
Anonymous Anonymous said...

Lots of of books on numeric literacy. Read John Allen Paulos, "A Mathematician Reads the Newspaper" or "A Mathematician Plays The Stock Market", and even those versed in math don't get it.

But isn't it odd, for the last 20 years, Wall Street and their paid-for political pawns have been trying to turn everyone person into a hyper money chasing trader, no matter their education, natural inclinations, or long-term ramifications for a civil modern society.

When I was involved in investment clubs, individuals were giddy about individual stocks and their quarterly earnings and sales. To hell how much the CEO made, or how the company actually made money, treated its employees, or the environment. But ask them what their annualized return was, and you'd get a blank stare. It was then you realized they didn't really understand or know. If you watch the infomercials for things like Investools, all you have to do to make money on Wall Street is buy their software (and data service) and follow the pretty charts.

Rolling Stones had an interesting article, "The Big Takeover: The global economic crisis isn't about money - it's about power. How Wall Street insiders are using the bailout to stage a revolution"
"The mistake most people make in looking at the financial crisis is thinking of it in terms of money, a habit that might lead you to look at the unfolding mess as a huge bonus-killing downer for the Wall Street class. But if you look at it in purely Machiavellian terms, what you see is a colossal power grab that threatens to turn the federal government into a kind of giant Enron — a huge, impenetrable black box filled with self-dealing insiders whose scheme is the securing of individual profits at the expense of an ocean of unwitting involuntary shareholders, previously known as taxpayers."

Not sure how we can fix the problem, with Larry Summers in the mix. I knew Summers was responsible for deregulations, but I wasn't aware he joined a hedge fund after his shameful exit from Harvard. Is he any different than Phil Gramm?

"AIG Larry Summers and the Politics of Deflection"
"Larry Summers is the man directly responsible for the mess. As Clinton Treasury Secretary from 1999-January 2001 he shaped and pushed the financial deregulation that unleashed the present crisis. He was Treasury Secretary after July 1999 when his boss, Robert Rubin left to become Vice Chairman of Citigroup, where Rubin went on to advance the colossal agenda of deregulated finance directly."

3/22/2009 8:10 PM  
Anonymous Thomas Daulton said...

If you really want to quail against the screaming horror of how grotesquely inequipped the human mind is to deal with mathematics, be sure to listen to this audio clip. It's 27 minutes of pure torture, but if you have a good sense of black humor, it's the funniest thing you're likely to hear for years. A transcript is here, but the audio is much funnier.

Incidentally, a Trillion dollars' worth of US$ 100-dollar bills, is a lake big enough that many people might not be able to swim to the other side without drowning. That's $100-dollar bills, mind you.

3/23/2009 4:19 PM  
Anonymous Anonymous said...

I think I found the entire contents of the book posted here:

http://www.mises.org/web/4016#pg14

3/25/2009 10:53 AM  
Anonymous Anonymous said...

It's not arithmetic or even algebra any more :-O
Whose up for Quantitative Physics!
Does anyone know what the heck is going on?

They Tried to Outsmart Wall Street

3/27/2009 6:19 PM  
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