my mind on my money and my money on mind

so sayeth coolio back in the -- hey! -- day. just watched the nova program on the psychology of the financial markets mind over money where behaviour psychologists are questioning the long-held theory that markets are best self-governing because they are, put in the broadest term but first espoused by adam smith, rational and thus stable. but then how and why are bubbles created if the markets are ruled by passionless reason?

thank god they kept the jargon and the equations at a minimum. otherwise i'd have a hard time keeping up. the program was a very good investigative piece that did not try to answer the questions of rational versus irrational. it seems to my own limited personal view of the question that at the outset the markets are created by us and thus are an extension of us. and we are both rational and just plain fucking nuts at the same time. i recall in the midst of the housing bubble sitting in a local coffee house with anna where we overheard the conversation at the next table. two youngish men were talking about house prices that were ticking up by the minute and this upward swing appeared to have no end. one guy said, that's right, i'm gonna be rich!

perhaps he did become rich in the short-term. if he got out in time. otherwise he's drowning in his properties. bubbles are not new and tonight's program began with a brief history of the first modern bubble, the dutch tulip frenzy that burst in 1637 and devastated the dutch economy. as for our own bubble that burst in 2008 it would seem by most accounts that we got very close to utter ruin. the tragedies could've been wide and deep.

nova ended the program asking that maybe bubbles are woven into the fabric of our market economies. would that make them inevitable? i recall that the late polish poet zbigniew herbert published an essay on holland's tulip mania. herbert approached the subject as a forensic psychologist interested in the mechanisms of folly, greed and our singular striving for happiness. i'll let herbert have the last word.

Tulipmania -- the most extraordinary botanical folly we know -- was an episode inscribed on the margin of Great History. We have chosen it not without reason. It should be honestly confessed: we have a strange liking for presenting follies in the sanctuaries of reason, and we also like to study catastrophes against a gentle landscape. There are reasons more important than frivolous personal and aesthetic inclinations, however, For doesn't the affair we have described remind us of other, more dangerous follies of humanity that consist in the irrational attachment to a single idea, a single symbol, or a single formula for happiness?

This is why we cannot put a period after the date 1637 and consider the matter definitively closed. It is not reasonable to erase it from memory, or count it among the inconceivable fads of the past. If tulipmania was a kind of psychological epidemic, and this is what we believe, the probability exists -- bordering on certainty -- that one day it will afflict us again in this or another form.

['The Bitter Smell of Tulips' Still Life with a Bridle; ecco press, 1991. translated by john and bogdana carpenter]