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Wednesday 14 July 2010

Metaphors of Mind and Money

Theories of Mind

The question of how psychologists come up with their theories of how the mind works is one that’s long troubled philosophers. Now this might not seem like a very serious concern, especially to those of us more worried about whether our stocks are going up or down, but this is misleading: how our minds work is part and parcel of how financial systems operate and our theories about this process are important in developing sensible approaches to safe and profitable investment.

Unfortunately psychologists and cognitive scientists who study such things are as likely to suffer from the pain of the availability heuristic as anyone else. The general approach to theory of mind that is now most commonly used is simply based the latest set of tools available to the researchers, who view the mind as a computer. It has ever been thus because we need metaphors to think about things and without metaphors we have nowhere to start from. This brings with it a long legacy of hard to remove but wrong ideas about financial systems.

Historical Metaphors

It’s possible to trace the development of different metaphors through the history of science and psychology. Invariably it turns out that there are no real models of the mind separate from the technology of the world around us. So Sigmund Freud’s original ideas about psychotherapy were based on the then modern technology of hydraulics: so, emotions are repressed (dammed up) creating pressure which must then be released through some means, directly or indirectly, and so on.

The development of knowledge often follows indirect paths of metaphor like this: the development of evolutionary theory by Charles Darwin was influenced by Adam Smith’s idea of the invisible hand – the impossible creation of order out of chaos through the self-interested interactions of a rabble of largely independent agents. It was from economics that Darwin gained an insight into how natural systems could be self-organising and it’s now from evolutionary theory that economists like Andrew Lo are developing econo-biological theories of how markets work and how uncertainty courses through their lifeblood.

Quantum Uncertainty

Uncertainty, of course, is the very stuff of biological systems, reaching deep into our sub-atomic structures. The work of Michael Elowitz has shown how identical genetic make-ups can be expressed differently even apparently through the operation of quantum uncertainty: there’s jitter in our genes and sub-atomic physics in our minds.

Yet econo-biology is simply the latest in a very long line of metaphors mutating across boundaries between science, psychology, philosophy and economics. Currently the most powerful of these are the models of statistical inference and the digital computer. Between them these metaphors have come to dominate major areas of these subject areas and mostly their practitioners don’t realise that they’re in the grip of the self-mutating nature of the mind: give the mind a new metaphor to work with and it’ll change itself to use it. It’s the availability heuristic writ large.

Bring Back Ringo

This matters, unfortunately, because the failure of psychologists and economists to understand that their latest theories are simply one manifestation of the mind’s marvellous ability to modify itself to deal with circumstance means that they develop theories of behaviour that assume that their latest metaphor is the way that the mind actually works, rather than simply a description. From this fundamental mistake spread a whole range of rather nasty effects that end up with beetle-browed programmers in financial services companies creating algorithms that are assumed to remove uncertainty from trading platforms. Which is a bit like removing Ringo from the Beatles: they just wouldn’t work anymore, whatever you might think.

So back in the 1950’s a method of probability analysis of data to detect so-called statistical inference was created by psychologists to make it possible to link causes and effects. As a tool this was fine, to the extent that it was useful – which was often, but not always. However, some psychologists made the intuitive jump by analogy from the idea of having a way of analysing data in the laboratory based on probabilities to assuming that the mind processed data in the same way.

Humans Aren't Stats

This probably doesn’t seem like a big deal, but psychology embraced the concept wholeheartedly and great swathes of the subject were suddenly devoted to assuming that the human mind worked the same way as laboratory based statistical analysts did. Economics meanwhile was already set on a path that saw humans as rational processes of great swathes of data and embraced these ideas with alacrity. A tool for data manipulation was transformed into a metaphor for the human condition and from. People became all powerful manipulators of data, the mind a metaphorical statistician.

As Gigerenzer has pointed out on many occasions (see, for example Where do New Ideas Come From?) this probabilistic revolution is simply infeasible when implemented in the human brain. Once you leave the confines of the laboratory and expose people to the wide ranging set of stimuli in the real world it’s impossible to process data in the way that these models require. Sure, it’s possible to use the metaphor to generate some interesting ideas, but going the further step to assuming that the mind works in the same way is close to crazy.

Today's Metaphor, Tomorrow's Mind

Yet it’s a mistake that psychologists seem unable to avoid making. The development of the digital computer led to a whole new range of psychological modelling, taking the basic ideas of memory, processing centres and communications as the starting point to try and get a handle on the way the brain actually works. It’s fairly obvious to see how the metaphor of the computer would get psychologists interested, since there’s no question that the brain is a kind of computer.

However, the inability of researchers to separate the metaphor from the mind has led to a whole new range of theories which assume that the brain actually works the way that a computer or a computer program works. Many of these theories assume that the brain consists of a variety of loosely connected modules, each of which is responsible for some set of functions. This again is to mistake form and function – quite why any thoughtful person would believe that natural selection would have created the brain in the same way that a digital computer works is odd, to put it mildly.

The Last Metaphor

Gigerenzer, again, has written about this extensively and argues that the development of new tools gives researchers new ways of thinking about things – new metaphors – and that this leads to the development of new theories. As Gigerenzer quotes (ibid.):
“Now that the metaphor (of the digital computer) is in place, many find it difficult to see how the mind could be anything else. To quote Philip Johnson-Laird (1983): “The computer is the last metaphor; it need never be supplanted””
The philosopher Julius Jaynes begs to differ. In his The Emergence of Consciousness in the Breakdown of the Bicameral Mind he argues that the proper metaphor for the human mind is metaphor itself: the mind is an amazing mechanism for subsuming ideas and generating metaphors by analogy. It’s a metaphor generating machine. Jaynes goes on to argue that consciousness itself is not implicit in the human condition: we had to learn it and we have to teach it to each successive generation.

Mind as Metaphor

The difficulty that psychologists and economists have in generating their own metaphors and their need to reach out to other subjects is revealing in its own right. Their struggle to come up with models that allow them to predict human behaviour has led to all sorts of stupid developments. In the main psychologists have learned to be cautious in how they project their ideas onto people. Economists are only now learning such lessons. Unfortunately economists matter to us on a daily basis while psychologists generally don’t.

We will doubtless continue to see developments in both subjects based on the latest cognitive and scientific research. The development of neuro-economics, econo-physics and econo-biology are simply the latest in a long line of quests for a useful metaphor. The truth is that they’re all useful and none tell the whole truth. We are infinitely adaptable and infinitely malleable. From this statement of the bleeding obvious psychologists and economists are not excepted.

Related Articles: The Malthusian Prophesy, The Neuroeconomics Revolution, Investing By Jerks

1 comment:

  1. Invariably it turns out that there are no real models of the mind separate from the technology of the world around us.

    Love that sentence.

    I have my doubts about the Ringo thing, however.