In the Sunday, November 2, 2008, New York Times business section was a great column by Robert J. Schiller, a professor of economics and finance at Yale, and a person who understands how the world works better than just about anyone teaching, researching, or writing today. In a piece in the “Economic View” section, entitled “Challenging the Crowd in Whispers, Not Shouts,” Dr. Schiller attempts to answer a question on many peoples’ minds: how could Alan Greenspan and other experts have so completely failed to predict and head off the worldwide financial meltdown that has taken place the last 18 months?
Schiller, who wrote a book entitled Irrational Exuberance , warning very specifically about the risk of a meltdown in the housing and financial markets, notes that there were experts who saw what was happening, but they were in a minority, and were treated as if they were less credible and of lower quality than the experts who held the prevailing view. He explained that, Dr. Irving Janis, a Yale psychologist, in a book entitled Groupthink, talked about the often unconscious insecurity experts feel when they are not receiving acclaim from their most renowned peers and the unconscious self-censorship that follows from it. As Schiller cogently states: “They self-censor personal doubts about the emerging group consensus if they cannot express these doubts in a formal way that conforms with apparent assumptions held by the group.” He goes on to describe how he experienced some ridicule and criticism from those who disagreed with him, and how difficult it would be for many people to buck conventional wisdom. (more…)