The Mismatch Between People's Abilities and the Challenges They Face

There are many examples of a gap between people's problem solving abilities and the magnitude or complexity of the problems they face. It seems reasonable to suppose this gap is growing. Even on the optimistic assumption that people are becoming smarter, it is plausible that the difficulty of problems facing humanity may be growing faster than people's intelligence. It is interesting that this gap is not generally recognized, and the issue of whether it is growing seems to be entirely ignored. Of course one response might be that there is no such issue, because there is no such gap, and thus nothing is being ignored. But it is far from clear that such a Panglossian view has any connection with reality.

Some examples of people's intellectual weakness have been provided elsewhere in the Imps, in Stupidity of Experts (information asymmetry) and How Choice Affects Preferences. Those examples are academic. Examples of people's mental deficiency of more practical significance also deserve consideration. Some that come readily to mind are the decision to deregulate the American financial system that arguably helped cause the Great Recession, the decision to invade Iraq with nothing like a serious plan for dealing with the aftermath, the persistent belief (long after the vindication of Keynesian economics) that the correct response to an economic downturn such as the Great Recession is balancing the budget, the decision of the Germans to look to Hitler to solve their problems, and perhaps the decision of American Republicans to choose Trump as their leader.

The creators of the Euro overlooked the obvious problem that its establishment would remove the ability of a country to address economic underperformance by devaluing its currency. No substitute was introduced. Consequently, the economic downturn in southern Europe resulted in prolonged stagnation and political instability. Thus Joseph Stiglitz writes that

The creation of the euro is the single most important explanation for the extraordinarily poor performance of the eurozone economies since the crisis of 2008. ...
The disappointing thing was that after the crisis, they didn’t learn a lesson. What they did was double down on that same recipe — austerity.
- Peter Goodman, How a Currency Intended to Unite Europe Wound Up Dividing It, NYT, July 27, 2016

Of the Germans' view that if governments prevent budget deficits and inflation, the markets can be counted on to deliver prosperity, Stiglitz says, "I’m shocked about how strong the belief is in this view that has been totally discredited elsewhere."
- quoted in Peter Goodman, How a Currency Intended to Unite Europe Wound Up Dividing It, NYT, July 27, 2016

Anthony Weiner on how he got into trouble:

“It was just something that technology made possible and it became possible for me to do stupid things. I mean, the thing I did, and the damage that I did, not only hadn’t it been done before, but it wasn’t possible to do it before.”
- Jonathan Van Meter, Anthony Weiner and Huma Abedin’s Post-Scandal Playbook, NYT, April 10, 2013

Here's an example of the complexity of a problem exceeding the ability of the humans involved to solve it successfully. Whether the cause of the failure was stupidity, or ignorance, or insufficient attention to what was important, the mental strengths of the responsible humans fell short of what was needed.

“We, as humans, are not doing the research and finding out the facts before we make decisions.”
- Juanita Stanley, commenting on the failure of Dorchester County officials to consider the impact on insects other than the targeted mosquitos, or to warn registered beekeepers, in advance of aerial spraying of the pesticide naled, with the consequence that her entire population of over 2 million bees was killed, quoted in Alan Blinder's Aimed at Zika Mosquitoes, Spray Kills Millions of Honeybees, NYT, Sept. 1, 2016

Mark Lebovich reports that Hillary Clinton is concerned about the way in which traditional connections between people have been transformed by modern technology:

... Clinton was making a bigger point here, about the importance of connection and the sharing of stories in a political world overrun by snapshots, caricatures, fragmentation and reality distortion. ...
Your communities should begin small, she said, in terms that precisely echoed those set out in her 1996 book, “It Takes a Village.” You form identities in your family, she said, and then in your neighborhood and in wider communities. “It was all person to person, and you learned to deal with people, for better or worse,” she said. She contrasted this with modern social-media cultures. People use the terms “friends” and “followers” to describe people they have never met, whose identities they think they know but may not even be real. “And you are having emotional and intellectual experiences,” Clinton said, “that are unlike anything that’s ever happened in the entirety of human history.” ...
“There are some difficult trends, which are not primarily political,” Clinton told me. “They are more cultural, psychological, and we just have to deal with them.” Earlier she had mentioned the 1985 book “Amusing Ourselves to Death,” by Neil Postman, about how television has oriented politics more and more toward entertainment. She also cited the historian Christopher Lasch, the author of “The Culture of Narcissism.” The authors, she said, “were trying to come to grips, before the internet, trying to understand what was happening in our society, that we are experiencing a level of alienation, disconnectedness.”
- Mark Leibovich, ‘I’m the Last Thing Standing Between You and the Apocalypse’, NYT, Oct. 11, 2016

Profit maximization in some cases depends on exploiting the inability of customers to understand what they are being sold. Financial products offer such opportunities. Annuities are a good example.

Even a well-caffeinated person with an advanced degree in math would have a hard time deciphering a 53-page contract called “Your Flexible Premium Indexed and Declared Interest Deferred Annuity Policy.” ...

Susan Jennings, senior counsel at the National Life Group, the annuity issuer’s parent company, defended its materials, saying she believed the interest rate methodology was laid out clearly. ...

Still, how do investors know whether the product is appropriate for them?

Craig McCann, a former economist for the Securities and Exchange Commission, has built a computer model that is intended to make those calculations. He has employed close to a dozen people with Ph.D.s in math to dissect indexed annuity products as part of his firm’s work, which provides analyses for regulators and litigators representing investors. He said it took years for his team to master them.

“No agent selling these or investors buying these has the foggiest idea of how these work,” said Mr. McCann, who reviewed Ms. Lindert’s contracts.

But indexed annuities have to make sense for at least some investors, right? Perhaps for the incredibly risk averse? “No,” he said, without hesitation. “Never.”
- Tara Bernard, Even Math Teachers Are at a Loss to Understand Annuities, NYT, Oct. 28, 2016 (See also her Think Your Retirement Plan Is Bad? Talk to a Teacher and An Annuity for the Teacher — and the Broker.)

Global warming is precisely the kind of threat humans are awful at dealing with: a problem with enormous consequences over the long term, but little that is sharply visible on a personal level in the short term. Humans are hard-wired for quick fight-or-flight reactions in the face of an imminent threat, but not highly motivated to act against slow-moving and somewhat abstract problems, even if the challenges that they pose are ultimately dire.
- NADJA POPOVICH, JOHN SCHWARTZ and TATIANA SCHLOSSBERG, How Americans Think About Climate Change, in Six Maps, NYT, MARCH 21, 2017

Matthew d'Ancona on Theresa May:

In her unfairly criticized manifesto, she eschewed glib slogans and confronted issues of great and pressing complexity, such as... the grievances of those left behind by the hectic forces of globalization and modernity.
- MATTHEW d’ANCONA, Britain Will Pay for Theresa May’s Election Gamble, NYT, JUNE 9, 2017

''“The problem,” Leveson [a professor of aeronautics and astronautics at MIT] wrote in a book, “is that we are attempting to build systems that are beyond our ability to intellectually manage.”
- JAMES SOMERS, The Coming Software Apocalypse, The Atlantic, SEP 26, 2017

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