The Madness of Men

Sir Isaac Newton once said: "I can calculate the movement of the stars, but not the madness of men.”

Well, under this context, I’m sure Newton was being sexist and women were equally mad…but that’s not my premise. Today, I simply wanted to point out what happens when people don’t study their history.  The result of ignorance might look like madness…

Sir Isaac didn’t have a lot of historical examples to follow when he invested twenty-thousand pounds in what became known as the South Sea Bubble, unless one counts Tulipmania.  Many economists consider Tulipmania—when fortunes were lost on the price of a simple tulip bulb—more akin to commodity speculation. That’s what’s happening with oil prices now, and if consumers would simply quit buying oil and gas, those commodity traders would crash like a house of cards, just as the tulip traders did. There’s a historical example I’d like to see us follow—quit paying stupid prices for worthless product. Gold is the same. You can’t eat it, you can’t live in it, and it’s value depends entirely on what you’re willing to pay.

But “bubbles” are something else and what we just recently experienced with the housing market. Anyone with any amount of economics or history background could have predicted that what goes up, must come down. Did everyone truly believe that housing prices would never come down? Why?  The South Sea Bubble, and the French version— the Mississippi Bubble, showed us what happens  to people who believe what they’re told without proof, and that’s what happened to us. People were almost literally sold hot air.

Of course, the details of any economic disaster are far more complicated than moral lessons about education, but understanding what has happened in the past enables us to turn a more skeptical eye on grandiose promises. In both the English and French bubbles of the early 1700s, wheeler-dealers made grandiose promises of wealth. They rapidly drove up stock prices on excitement and speculation without returning a dime in income. (The ploy didn’t begin or end in the 1700s but those economic bubbles were so huge and devastating that they they’ve become symbols of the public’s gullibility.)

Any good snake oil salesman knows the tactic:  Buy shares in our trading company! Buy shares in our bank! You’ll be rich as a lord, we promise. And because the general public believed these important personages, their noble leaders, the general public got ripped off to the tune of millions of pounds/francs, leading to bankruptcies, suicides, and penniless widows and orphaned children. The lessons are numerous but I’d boil them down to, if you’re going to gamble, buy a lottery ticket. It’s cheaper and easier to comprehend. If you want to make an investment, then understand what you’re investing in, what it will cost you, and how you will make a return. Most of the people now caught in foreclosure didn’t even realize that capital investments like houses require more money to maintain them over the long run. Education is required even to buy a home.

Historically, people are always more willing to listen to their leaders, whether they’re polilticians or aristocrats or simply wealthy. Psychologically, I assume that’s because people are too willing to believe that those in a position of power must know more than the average person—until disaster hits, the gap between rich and poor widens, or a whistle-blower reveals all.  So the bank says we’re able to pay a $2000 a month mortgage—they must know what they’re talking about, let’s buy it! And practically speaking (if I must), people just don’t have time to educate themselves on every single subject. They have to rely on those they believe know better.

I guess when I was young, I read way too much history to believe everything I’m told. I cut my baby teeth on the likes of Theodore Dreiser and Ayn Rand.  I was poor and I armed myself with knowledge (and laughed myself silly over Rand’s grandiose posturing—did she really believe that poor people had the money to buy quality instead of cheap? Common sense required!). 

What books did you read in your youth that armed you for today’s world? What ones would you recommend to the generation growing up now? Is there an easier way to teach our children how to think for themselves?

(and I apologize for the lack of images--I've been visiting with the grandkid and buying a house and my world is just a little crazed at the moment!)

Comments

[Kate]

I studied the Great Depression for my history major. I had a good professor who didn't believe that Roosevelt got us out of that depression. I am currently listening to a new take on the Great Depression. The author is looking at how the government deals really extended the the depression. Government spending is not the way to pull out.
Recommended reading: Gaia's Garden; any book discussing Permaculture and how it is done.
I think that our children need to learn the old trades - blacksmithing, tailoring, shoe making. Just my take on it.

[maryjoputney]

I'm a Yankee farm girl and as such was raised to be frugal. I never could read Ayn Rand. But probably the best piece of financial advice that relates to what you're saying is "If something sounds too good to be true--it is."

And it's also true that those who don't understand history are condemned to repeat it. Which is so very, very true of financial bubbles, that invariable have a rallying cry of "This time it's different!"

No. It isn't. Greed and stupidity haven't gone away yet.

[Hellion]

I read Laura Ingalls Wilder. What has it taught me about today's world? That what matters is family and friends. That the best qualities to have are: the ability to work hard, enjoy simple things that are true happiness, realize that things will get better if you just persevere, and a willingness to embrace adventure and change.

[LouisaCornell]

I was raised by the daughter of Alabama share croppers and the son of Pennsylvania coal miners. They taught me that NOTHING in life is free except love. The rest you had better pay for - with money, hard work, effort, time and / or intelligence. Only then is it truly yours.

There is an entire generation of "children" who think that all of the aid they get from the government doesn't cost anything. "That comes from the government. I'm not hurting anyone." They really need to be taught often and early that "The Government" is me and you. We ARE the government. Some hard-working man or woman PAID for all of that free stuff you are getting.

And there is no feeling on earth like pride of ownership. I own the land I live on outright, but it took me fifteen years of hard work paying a mortgage I knew I could afford to get that done.

I just wish they taught Practical Economics in school so that the next generation doesn't fall prey to the idea that you can have it all without earning it. Money makes money? NO, somewhere somehow PEOPLE make money. And the people who take it without really earning it? They're just thieves in five thousand dollar suits. And that is true of any era!

[Susan/DC]

There are a number of laws I would put into effect if I ruled the world, and one of them is that a semester of Accounting and a semester of Economics would be required courses to earn a high school diploma. To understand even a little bit of the arguments about our economy or the background of scandals like Enron or WorldCom, you need to know something of how money and the economy work. Not that these courses would provide the answers or stop the arguments. After all, there's significant disagreement even among Nobel Prize winners (e.g., while many economists who would agree that it was WWII and not FDR's New Deal that finally pulled us out of the Depression, they would argue that it's not because there was too much government spending but because there was too little; some programs were just beginning to work when politicians lost political will and closed them down). But at least people would understand the vocabulary and a have a sense of the basics.

As for the government not being free, that's certainly true, but I feel about it the way I feel about much else: I'm happy if I get what I pay for. No one likes waste, fraud, and abuse, but I'm very grateful for the Centers for Disease Control and other government functions that I couldn't provide myself.

[Patricia Rice]

Beautiful insights, thank you! I really don't want to return to Laura Ingalls Wilder days and live on the prairie with gunnysack dresses, but I agree that family and friends are the most important parts of life, the rest is just window dressing.

And man, do I believe more education is required so people have some understanding of Why Things Happen. Financial disasters are not acts of God! We made them happen. But I fear we're living in the same ignorance as our Regency brethren.

[Linda Banche]

How many regencies are there where the poor, sheltered heroine has a wake-up call when real life happens? Women are raised to believe whatever authority figures tell us and punished if we don't. Gullible people are easier for those in power (usually men) to control.

The gullible masses are institutionalized in history. Look at the Georgian era and the poor people and their "betters". The aristocracy were filthy rich because they oppressed the poor. The divine right of kings and its trickle down was so ingrained that those poor tenant farmers actually believed the aristocrats were better people--everyone has his/her place in the world, and god set those above you there for a reason.

The best example of this is Uncle Tom in UNCLE TOM'S CABIN. Tom truly believed he was property and his owner had the right to literally sell him up the river.

As for money, I think those who have always had money believe they will always have it. Those who never had any(like me) work hard and save a lot.

There will always be people who want the result without doing the work. Shall I tell you about the ones who sign up for the aerobics classes I go to and then come to one or two and quit? They're surprised at how hard aerobics. Why would they think it's easy?

[Anne Gracie]

Great post, Pat, and I'm really enjoying the comments, too.
It's not exactly what you're talking about, but a book, or series of books that taught me something about how the world works was Issac Asimov's "Foundation" series -- sci fi, about colonization and empire.

[Patricia Rice]

Learning about colonization and empire is excellent history, even if it's fictional. When one country believes it can take over the world, it sets an example!

And really, education--whether schoolbook or real life--is the best way to learn our limits. I just wish more people would test theirs!

[Louis]

The books that I read most as a teenager were related to technical radio. I was getting myself ready to take a radio license exam. I passed and went to work at the local radio station. Stayed in the field for nearly 60 years.

I went thru the depression. We were not affected too much until about 1939 when the railroad closed the shops in my home town. It was scramble time then...I went to work at 16 thru a school program called "Diversified Occupations. Went to work at a chain of theatres as projectionist, doorman, bill poster, or what ever needed to be done.

[Maggie Robinson/Margaret Rowe]

Buying a house! Speaking as a former Realtor, that's one of the most stressful things anyone ever does, even if they CAN afford to pay the mortgage. All I can say...watch out for closing costs, which so many people are simply stunned by. (I bought a new house myself last May & even though I knew what was coming had to scrape myself off the floor, LOL)

In my freshman year of high school, we were required to take an economics course as part of the social studies credits. However all I can remember is that the teacher was super-handsome, really hero material. :)

I DO remember months of calculating interest in math class in elementary school though--our depression-raised teachers had a horror of debt and discouraged us from every buying anything on credit. My family was directly affected by the 1929 crash--my grandfather & great-uncles were all mixed up in Wall Street up to their eyelashes. Nobody jumped out of windows, but I was a sucker for The Great Gatsby and other Fitzgerald books.

For a while I also read a bunch of depressing Russian literature, feeling like a persecuted peasant. But life is too short, so now I read and write romance. :)

[Joanna Waugh]

This is going to sound a bit strange but the old fables really stuck with me. My favorite is the one about the Little Red Hen who finds a grain of wheat and tries to get the other animals in the barnyard to help her plant, cultivate and harvest it. Nobody lifts a hoof, paw or feather. But when she pulls a loaf of bread out of the oven, they're all there for a handout. She and her chicks eat the whole thing.

[Patricia Rice]

Oh Joanna, not strange at all. My very first books were the Little Golden Books with all those clever tales about The Little Engine That Could and so forth, and I really think a lot of that morality is imprinted on my tiny little brain.

Louis--I bet you could write a book! People today really do need to know how to survive this scary new economy, and I'm afraid too many young people are clueless.

Maggie, we buy houses with regularity, but this is the first time since the housing collapse. It's been the craziest experience we've EVER had. The game playing is beyond belief. Maybe I should write a book about it. "G"

[Wynne]

I know The Little Red Hen! I read it as part of a 12-volume set called My Book House, which started with nursery rhymes and worked its way through fables, fairy stories, and all manner of good things up to Gulliver's Travels.

I think people learn to think for themselves when they have responsibilities. But books with models of independent thinkers, such as To Kill a Mockingbird, help.

[joanna bourne]

I guess we never stop being swept away by popular madness. Hula hoops. Pet rocks. Silly bandz. Viral videos.

[Janice]

I agree with you, SusanDC; I am appalled at the things clients, friends and family just don't seem to know about our economic system -- I know people who not only can't balance their checkbook, they don't even know they should be looking at the numbers. Let alone anything more complex. A good friend of mine, whom I consider very intelligent, lost her house because she 'believed', and she just didn't put things together in time. Nor did she know to consult an independent financial advisor before she got in over her head.

I had bookkeeping in high school and a mom who made it through the Depression by making the most of the least. I also read a lot of science fiction, which teaches you to step back, be objective and look for larger patterns. From them I cobbled together some sense of how things worked in the world. I'm not always exactly a frugal person myself, but at least I know my comfort level and the risks inherent.

Which reminds me -- whenever I read regencies or Georgians, I have trouble with the cost of things -- I get pulled out of the story while I try to figure whether a thing was considered cheap, or too expensive, or whatever. I appreciate the details, but they seem to be all over the map between different authors.