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Wednesday, October 13, 2004

But I thought it was okay

Dysfunctional choices are not always apparent to the chooser until the unintended results become apparent. The dysfunctional chooser is one who makes a choice based on:

  • a similar situation, but with critical differences
  • a new situation with faulty information
  • an expectation based on wanting an outcome rather than the ability to discern the likely outcome
  • an emotional aversion to another, better choice
  • outside pressure to make the choice one way rather than another
  • willing to take a risk knowing that failure is likely, but hoping for success
There are other reasons, but let's take a look at these. As a golfer (hacker), I often find myself facing a 200 yard approach shot to a green. Suppose this particular shot is difficult because there is a water hazard in front of the green and sand hazards along side the green.
  • Similar, but different... I hit a 200 yard fairway shot to the middle of the green last week... critical difference: no water in front of the green and no sand alongside... and the ball only flew 175 yards and rolled the remaining 25 yards. So, I decide that I can make the shot to the green this time... and it ends up in the water.
  • I'm playing a course I haven't played before. I know I am at the 200 yard marker and figure I should be able to get pretty close to the green, so I take out my 5 wood and hit away. Only problem is the water in front of the hole isn't visible and I didn't check the course layout on the card... and it ends up in the water.
  • I can score less than 90 strokes if I make it on the green from 200 yards and sink the putt. I really want to break 90, so I hit away and... the ball goes in the water, I get a penalty shot from in front of the water, mis-hit the next shot back into the water. Take another penalty shot. Hit the next shot slight over the green, chip on the green and put the ball in the hole after three putts... and score 97.
  • I know I can get on the green with two short shots, but I'm a manly-man and that's a girlie-man approach. So I hit the 5 wood shot... into the water.
  • I know I probably will not get on the green with a 200-yard shot over water, but the guys I'm playing with all say they would go for it... so I do... and the ball goes in the water.
  • I know that it's unlikely I'll get the ball on the green... in fact, I know I'll probably end up with a bad shot into water or sand... but it would be "sweet" to make that 200-yard shot... so I do... and the ball ends up in the water.
In all of the above situations, there was a possibility that I could actually make the 200-yard shot onto the green. But in all cases, I chose to disregard the likely outcome (except the one where I hadn't played the course before... and didn't bother to check to see if a potential problem might exist). My choices were all dysfunctional because my thought processes were faulty. While it was true that I might be successful, I had an unrealistic assessment of the situation.

Interestingly, had I actually made the shot, I would then reinforce the faulty thought processes that would lead me to attempt the shot every time a similar situation arose. I would ignore my failures and view my failures as aberrations. Oh, wait, I guess I do that. Well, golf isn't all that important.

The problems in our lives occur when we make dysfunctional choices from which we can't walk away.

We have a child with a woman to whom we are not married. She wants money to raise the child. So we shoot her for asking and beat the child to death so there will be no support payments. Okay, so there are no support payments (our goal), but we go to jail for the rest of our life and destroyed our DNA heir in the process. That's dysfunctional.


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There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
It was beautiful and simple, as truly great swindles are.
- O. Henry
... The Government is on course for an embarrassing showdown with the European Union, business groups and environmental charities after refusing to guarantee that billions of pounds of revenue it stands to earn from carbon-permit trading will be spent on combating climate change.
The Independent (UK)

Tracking Interest Rates

Tracking Interest Rates

FEDERAL RESERVE & HOUSING

SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006 Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
November 28, 2007 FED VICE CHAIRMAN DONALD KOHN
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."
http://www.reuters.com/

December 11, 2007 Somehow the Fed misses the obvious.
fed_rate_moves_425_small.gif
[Image from: CNNMoney.com]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's Economy.com. "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.”
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)