Bloomberg
May 10, 2012
As commentators, politicians and academics struggle to make sense of the recent financial crisis and its ramifications, many of their accounts seek to identify a root cause or the “beginning of the story.”
Theories abound: Former Federal Reserve Board Chairman Alan Greenspan’s “easy money” for banks; the blindness of the credit- rating companies; strategies that encouraged low-income Americans to own homes; the invention of high-risk investment instruments; high-leveraged borrowing; short-sighted executives; greedy investment bankers; lying real-estate dealers, and so on.
We know there was no single cause or event that set in motion the crisis and that the truth is complex and multicausal. So why do we keep seeking the easy answers? It may be that we are hard-wired to do so.
The human brain is designed to support two modes of thought: visual and narrative. These forms of thinking are universal across human societies throughout history, develop reliably early in individuals’ lives, and are associated with specialized regions of the brain. What isn’t universal or natural is the kind of highly structured cognitive processes that underlie logical and mathematical thinking -- the kinds of analysis that produce the most remarkable human cultural products, especially scientific achievements such as interplanetary travel, electronic devices and genetic engineering. They also allow the types of analysis needed to design effective economic policies and business strategies.
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