Chapter 3. HUMAN BEHAVIOR

 

Behavior is a mirror in which everyone displays his own image.

 
 --Johann Wolfgang von Goethe
 

People's behavior makes sense if you think about it in terms of their goals, needs, and motives.

 
 --Thomas Mann

These days it's vogue to say humans are irrational—scores of new books from respected behavioral economists tell us how dumb we all are and how we continuously act in ways contrary to our best interests.

I disagree. We're a very rational species—just not in the ways classical economics wants us to be. Humans—in both hardware (brains) and software (the mind)—are the finest machines ever built, but we weren't built for the civilization we've got. Our cultures, economies, and markets are something bigger than we are—and expanding at an accelerating pace. We "irrational" humans gave rise to systems far beyond our individual capacity to understand. We simply weren't made for dealing with markets—our minds and bodies were evolved over many eons to survive in the wild, pre-civilization. Toward that end, we're quite an impressive species! Humans evolved so well, we dominate the planet and utilize resources far better than any life form ever has.

But while markets evolve at breakneck speed, the mind doesn't. Human brains—their instincts and natural emotions—simply do not change as quickly as markets or societies do. Economies and capital markets move faster than our brains can keep up with. It takes (even by the quickest estimates) hundreds or thousands of years ...

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