Why is the extremist faith of the Islamic State on the rise? Why are new concepts such as Bitcoin and the metaverse driving people crazy? American writer William Bernstein believes that human religion and financial fanaticism have a long history, and he combines many advances in information technology, finance and neuroscience in "The Madness of the Group" to provide a new interpretation of the popular illusion and analyze the social and psychological logic behind human mass fanaticism.
The following is authorized by the publishing house and published in the introduction written by Fang Qin, who teaches at the School of Economics of Fudan University, for "The Madness of the Group". The original title is "Under the madness, reason helps". The author argues that "The Madness of the Crowd" is a Sisyphusian move, because no matter how much we know about this type of mass madness, similar madness is bound to reappear in the foreseeable future. But this is not a futile effort, because in any case, we at least make an effort to try to understand the irrationality of human behavior and to warn the world of possible future risks.
The Madness of the Crowd, by William Bernstein, translated by Wang Xinghua, CITIC Publishing Group, November 2022.
Under the madness, reason helps
Written by| Fang Qin (School of Economics, Fudan University)
Everything that is rational is realistic; Everything that is realistic is rational.
- Hegel
"Yesterday Reappeared":
The history of human mass madness
In 1841, a young Scottish journalist named Charles McKee published a book called Memoirs of Extraordinary Popular Delusions, later retitled Extraordinary Popular Delusions and the Madness of Crowds. The book consists of three volumes, which Mackey calls "National Fantasy", "Bizarre Foolishness", and "Philosophical Fantasy". The first volume is the most famous, and McKee chronicles three of the most famous economic bubbles at the beginning of mankind's entry into the modern world: the "Tulip Fana" of 1637, the "South Sea Incident" of 1720, and the "Mississippi Plan". For this reason, the book has long enjoyed a high reputation in economics and finance circles, and many economists have cited historical sources in their writings.
McKee's interests aren't limited to documenting financial crises, though. In his view, the financial crisis and the phenomena of relic worship, biblical prophecy, fortune-telling, witch hunting, crusades, and alchemy are essentially the same, that is, a kind of mass madness that runs through the course of human social history; What he wants to tell is a history of human mass madness.
From the seemingly unthinkable bizarre events that McKee records but would feel ordinary if he were in them, and from McKee's very act of recording these events, we can feel a deep pessimism, a deep pessimism about the conditions of the Age of Enlightenment that have descended on humanity.
In 1500, the world entered the threshold of modernity; In the 17th century, Europe ushered in its Age of Enlightenment. It was a time of saying goodbye to the past, looking forward to the future, believing that with the development of reason can lead to the ultimate liberation of mankind. The greatest philosopher, Immanuel Kant, sounded the loudest clarion call of the Enlightenment:
The Enlightenment is the liberation of human beings from the immaturity that they have imposed on themselves. Immaturity is the inability to use one's own reason without being guided by others. When the cause is not a lack of reason, but a lack of courage and determination to use it without the guidance of others, then this immaturity is imposed on oneself. Sapere aude ！ (Dare to know!) Have the courage to use your own reason! This was the slogan of the Enlightenment.
But reality is not as rosy as philosophers imagined. By the 19th century, as McKee and countless other contemporaries had observed, the ignorance and madness that accompanied humanity for thousands of years had not faded at all because of the baptism of the Age of Enlightenment. On the contrary, with the blessing of economic prosperity and technological progress, the mass madness in modern society has intensified.
With doubt, sarcasm, calmness, unease and even a hint of fear, McKee collected and recorded more than a dozen events of mass madness in human history from the perspective of a journalist.
Now, nearly two centuries after McKee's writing, the book before me, William Bernstein's The Madness of the Crowd, can't help but give me a sense of yesterday. It's the same apocalyptic fantasy, the same financial fanaticism, the same mundane foolishness, but there are some slight differences:
A poor adventurer suddenly thinks that a railway line from Town A to Town B is a huge public good from which he can reap great benefits. So he bought a military map, a gazetteer of Brooke County or somewhere, and a directory. First, he drew a line between two towns, some pretty curves here or there between the gloomy hills, with the aim of giving it a real feel, which he called the investigative report, although he and his people had never been to the place. Toponymic dictionaries, directories, and a can of beer paid to a scoundrel or coachman constitute all the raw materials for his source of income. Fortunately, annual income has never fallen below 15%, 20% or 30%. With so much income so often, he was embarrassed to deceive more people.
This passage in the book comes from a critic who was McKee's contemporary. His derision of the British rail bubble echoes McKee's comments about the Mississippi Plan and the South Sea bubble. The difference is simply that, as a chronicler of the era's keen sense of mass madness, McKee was indifferent to the railway bubbles that were happening around him (England experienced at least three railway bubbles between 1825 and 1845). He even argues that rail investment is not comparable to the South China Sea bubble because it is based entirely on false facts, and "railways are a necessity in this era." Silent philosophers and active business people, which are themselves a real estate and tangible asset, can see that there is nothing more noble and advantageous than British capital for these projects".
This contrast seems to make it clear that sometimes even someone as witty as McGee can't escape the curse of mass madness.
So it's not surprising that 180 years later, William Bernstein, a neuroscientist, financial theorist, and historian, is once again recounting the history of mass madness. For the present generation, who transcended McKee's time and experienced the rapid development of science and technology after the Industrial Revolution, the frenetic movements are still "yesterday" again and again: they are not old history, but the reality we are experiencing.
"The Great Madness", by Charles McKee, People's Posts and Telecommunications Publishing House, August 2017.
A sociopathological examination of mass fanaticism
But somewhat different from The Great Madness: Extraordinary Popular Fantasy and Mass Madness, Bernstein narrowed the subject a bit, abandoning topics such as witch hunting and alchemists to focus on two types of mass madness: financial fantasy and religious fantasy. Because he argues that "on the surface, religious and financial events seem to belong to different phenomena, but they are driven by the same social and psychological mechanisms: the seductive power of narrative; Human beings tend to fantasize about 'patterns' that do not exist; excessive conceit and overconfidence of leaders and followers; and, above all, an overwhelming tendency to imitate the behavior of those around them, even if it is unfounded or self-destructive."
This trade-off partly reflects the book's characteristics. In contrast to McKee's purely descriptive text, Bernstein tried to use a complete set of analytical logic to tease out instances of financial and religious mass madness.
Objectively speaking, Bernstein's analytical logic is a "stitching monster" that integrates different disciplines such as biology, psychology, and finance with different research fields, and is roughly composed of the following views and inferences.
First of all, human beings have a most basic "biological instinct": to get as much enjoyment as possible at as little cost (cost).
Second, over the long history of biological evolution, humans have developed a series of "cost-saving" capabilities to accelerate their own evolutionary process. One of these many abilities is the ability to imitate - we will make ourselves more adaptable to changes in the external environment by imitating the innovations of others; The other is to interpret the world in a patterned way—"we are born to look for connections that often don't exist."
Finally, we are also evolving towards "cost saving" in biological structure. For example, neuroscientists have found that humans have two different types of cognitive processes: rapid emotional responses, which evolutionarily control by the very ancient limbic system of the brain; The other is conscious reasoning, and evolutionarily speaking, the more recent cerebral cortex controls this type of cognition. In evolution, emotional response has dominated because it helps us respond quickly to red flags.
The above factors add up to a conclusion that has been experimentally demonstrated by psychologists: people are irrational; In other words, we think we are rational, but in fact it is just a rational explanation. Humans are "cognitive misers" who are reluctant to engage in costly analytical reasoning and prefer a psychological shortcut to a quick conclusion. Therefore, "human beings do not use strong intelligence to calmly analyze the world, but rationalize the facts and make them meet emotional expectations."
As a result, "narrative" becomes the main way we understand the external world. A good story trumps any facts and figures; Not only that, but to make the story more convincing, we also deliberately avoid facts and figures, stay away from the real world, and fall into self-delusional fantasies. At this point, as the social psychologist Solomon Ashi's famous line-length experiment revealed, we rely heavily on the judgment of others and are influenced by their actions.
Therefore, the kind of comic overnight rich narrative and the tragic apocalyptic narrative are equally fascinating to us. The former tells us how to quickly accumulate earthly wealth; The latter makes us focus on the risks to our environment: both give us survival and genetic advantages from an evolutionary point of view.
We will not explore the truth of these two narratives, because the large number of people who believe in these narratives will have an irresistible attraction to us. The more people who believe, the more correct the narrative; When most people in society believe it, they must be correct - this is the "fairy effect". The "fairy effect" is the basis for collective decision-making, and it can also quickly lead to collective investment fraud or religious genocide.
The above is the analytical logic of the mass madness of finance and religion.
Bernstein used such an analytical logic to sort out four major financial fantasies from the 18th to the 20th century—the Mississippi Plan of 1720 and the South Sea bubble, the British railway bubble of the 19th century, the economic crisis of 1929 and the Internet bubble of the 90s of the 20th century, and the cultural and political tearing of the United States and the entire world from the 16th to the 21st century caused by the religious fantasy of the times.
For example, Bernstein's account of the world economic crisis of 1929, combined with the work of economist Minsky, psychologist Daniel Kahneman, and others, is very different from traditional economics. First, the narrative that constitutes this financial fantasy requires four realistic conditions: the easing of credit brought about by falling interest rates, the emergence of exciting new technologies, the oblivion of past booms and busts, and the abandonment of traditional and prudent investment methods. Second, there need to be four categories of storytellers: promoters, the public, politicians, and the media. Ultimately, widespread systemic errors in analysis, the instability of the credit supply in the modern banking system, and the contagious narrative about the myth of social wealth contributed by four types of narrators have collectively triggered the collapse of the overall economic structure of society.
In this respect, The Madness of the Crowd deepens its theme, no longer limiting itself to a brief description of the phenomena of mass madness, but rather conducting a sociopathological investigation, trying to find out what factors contribute to the continuous emergence of financial fanaticism and religious extremism in human society.
Stills from "The Wolf of Wall Street".
Under the madness, reason helps
However, the author lacks in event description and theoretical analysis, and in the description of events, we can clearly see that Bernstein not only wants to cut in from a micro perspective, four or two pounds, and reflects the changes of the entire era with the behavior of some key figures, but also wants to adopt some grand narratives to show readers the picture of the development and evolution of human beings over thousands of years. However, it is difficult to connect the two smoothly, and the interspersion of micro and macro perspectives leads to some confusion when reading, and it involves the results of multiple disciplines, and it is difficult to say whether these theoretical studies have revealed the root of mass madness. But one thing is certain: behavioral economics and psychological experiments show that experts are often unreliable, that their grand goals for world peace always go in an unfortunate direction, and that falling into mass madness is an inevitable fate of modern society.
I am sure that many readers will read this book and feel that this is just a cliché, and the phenomenon of financial fantasy and religious fantasy similar to that described in the book has been repeated in human history and has long lost its freshness.
In fact, this is a sense of powerlessness that such writings often encounter. The author is like Don Quixote, who wants to fight the windmill of human mass madness.
Because, as the studies cited in the book reveal, humans have a genetic predisposition, tending to a group crazy behavior: we are social animals, we rely on collective decision-making, which is the result of our survival of the fittest as creatures over billions of years of evolution, "humans may be doomed to waddle on the planet of the space age with a Stone Age mentality."
So, does this mean that in the face of mass madness, we are powerless and inactive?
No. As Francis Galton's experiment with group rationality shows, collective decision-making can be highly accurate, but only if we meet James Sorowki's three requirements of crowdwisdom: independence of individual analysis, diversity of individual experience and skills, and efficient ways of gathering individual opinions. In short, we must ensure the ability of individuals to think independently - rationality, in order to ensure the accuracy of collective decision-making and avoid falling into group madness.
At the end of the day, it's still rationality.
Many scholars attribute the madness of the modern world to the fallacy of rationalism and to the over-optimism of the philosophers of the Age of Enlightenment about human reason. However, the opposite is true. Just as they put on their lips the famous quote of the great philosopher Hume that human reason is a slave to emotions, they often forget that Hume was also the most rational observer of his time, and he used the most rational and rigorous way to dissect complex human nature.
Stills from the TV series "Big Time".
Weber once predicted the modern world: "the iron cage of rationalization." However, the reason for the formation of the "iron cage of rationalization" is not the proliferation of rationalism, but "experts have no spirit", and the "hollow shell" lacking the rational soul fantasizes that it has reached an unprecedented level of civilization.
The problem in this day and age is not that we are too rational, but that even under the grip of the latest technology, we still lack the ability to use reason correctly.
Yes, our reason is still fragile; It is also true that we are often at the mercy of emotions and fall into irrational states. But don't forget, we also have an instinctive urge to rationalize everything. Perhaps one of the purposes of rationalization may only be to give us a sense of psychological satisfaction - peace of mind; But on the other hand, it also shows that we want to understand, to understand the irrational things that are happening around us.
"Everything that is rational is realistic; Everything that is realistic is rational. This act of understanding itself represents a never-ending attempt led by our immature reason.
And this is the real value of this book, an attempt to describe, analyze, and explain the financial and religious fantasies that have been repeated again and again in human history.
Such an attempt is bound to be a Sisyphusian move, because no matter how much we know about this kind of mass madness, similar madness will surely reappear in the foreseeable future. But this is not a futile effort, because in any case, we at least make an effort to try to understand the irrationality of human behavior and to warn the world of possible future risks.
And, more importantly, perhaps only after experiencing the Sisyphusian absurdity can we cultivate that individual independence, and human beings can develop a group fantasy that promotes social development. As the author points out, human society needs some "good scams": "No matter what flaws exist in American society, our greatest strength lies in our belief in the rule of law and equality before the law; Similarly, our economy works well because almost everyone believes that paper money and more ethereal electronically traded money represent real assets and liabilities." These are useful group fantasies.
At all times, we should remember that when we abandon individual independent thinking and become accustomed to the strange things that happen around us, group fantasies will lead to the worst, "in the presence of fantasy contagion and no effective defense, runaway fanaticism becomes more and more motivated until it finally hits the brick wall of reality."
Written by/Fang Chin
Excerpt / Lee Yongbo
Lead proofreading / Wu Xingfa