The Anthropology of the Credit Crisis: Magical Thinking, Irrationality and the Role of Inequality
314 Pages Posted: 27 Oct 2012 Last revised: 3 Jun 2013
Date Written: October 26, 2012
In 2005 I wrote a letter to the Financial Times describing the unsustainable nature of the financial instruments (derivatives) then being sold as insurance to protect investors from losses in other assets, failure of institutions and other untoward events. The complexity of these instruments and the magical nature of their acceptance by investors led me to an examination of modern economic practice from an anthropological perspective.
The flight from risk that derivatives represent is an ancient component of vertebrate life and is embedded in the caching of many animals. Other aspects of modern economics are residues of the history of human survival in simple exploitation of resources. The problem with the financial foundations of modern capitalism is that they are rooted in trends of social ideology that have come to be a structural component of economic and political entities since the development of economic systems in the late Neolithic. We have been a genus, that of Homo, for about 2.5 million years, and a species, that of sapiens, for perhaps as much as 200,000 years, but over either period, the type of means by which we made a living was hunting and gathering. This strategy required continuous mobility and cooperation between band members. The nature of our current survival strategy, that of complex society only began about 10,000 years ago in the earliest sedentary communities. So one might say that our current life style is new, adapting and tenuous. I described the central aspects of this ideology in my 2004 book, Sustainability, Human Ecology and the Collapse of Complex Societies, published by the Edwin Mellen Press. The purpose of this present book is to clarify the mechanisms by which this ideology has come to permeate most all religious as well as political belief systems and create conditions for financial booms, busts and economic hardship.
Keywords: economics, economic anthropology, financial instruments, irrational behavior
JEL Classification: A10, A11, A12, A13, A14
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