The Optimism Delusion

Expectations

Yesterday, I was reading an excellent article by Tali Sharot, a neuroscientist who is researching the mental constructs of optimism.  She discovered through her research that about 80% of her subjects, when asked about their personal future, expected their lives to be happy and turn out exactly how they wanted them.  They imagined professional success, good marriages, high achieving children, and many other standard definitions of happiness.  They did not picture unemployment, divorce, foreclosure, health problems or any of the other realities that are likely to plague them.  In short, when asked about their vision of their future, they were unwaveringly optimistic.

Her research also exposed an interesting paradox, while people view their own future very optimistically, they view the general future very pessimistically.  They think our country is on the wrong course, that we will see doomsday in our lives, that things will continue to get worse, all the while believing that they had a bright future in store for them personally.

I suspect this is the motivation behind bomb shelters and plans for the zombie apocalypse; we think the world will go to hell, but each of us thinks we will survive it.  It is probably also the reasoning behind things like the Rapture.  "Sure the Anti-Christ will destroy the world, but hey, I'll be sucked up into Heaven by God's personal Hoover, so I can have a front row seat for the end of the world, without having to actually experience it."  We have turned Armageddon into a spectator sport.

But to return to my point, humans in general, regardless of how unrealistic it is, have an optimistic outlook on their own personal future, no matter how bleak they see everything else.

I will call this the Optimism Delusion, and I think it is what might be behind the "better dead than sad' ideology that pervades America.

Sharot points out how the Optimism Delusion can be actually dangerous, both individually and to society.  On an individual level, it leads to denialism and risky behavior.  It is the thing that makes a woman devoutly believe that her boyfriend will stop hitting her once they get married; "all he needs is to feel secure that I'll never leave him and marrying him will prove that to him."  It is also what makes people keep smoking even though they know the risks, "my grandfather smoked until the day he died, at 98 years old."  It's what makes us take on a risky mortgage, "Yeah, it's a struggle now, but in five years, when I make branch manager, I'll be able to afford two houses like this."

The Optimism delusion blinds us to dangers across the entire spectrum.  We don't think we will ever divorce, be homeless, get cancer, or even have less than gifted children.  No matter what, we believe that bad things only happen to other people, at least we do until they happen to us.

However, Sharot still thinks that optimism is a good thing on the whole; she states that we need to expect to succeed in order to actually be willing to strive.  Optimism, in her view is a motivating factor, and necessary for enhancing our mental health.

Sure it is, right up until reality kicks us in the ass and the optimistic future shatters like a crystal goblet.  Then, it turns out, optimism wasn't that great for us after all.

Let me explain.  If we think everything in our lives will be great and wonderful, and then suddenly we find out it's not, we are not going to react well.  When a spouse invites you out to a nice restaurant for Valentine's Dan and proceeds to tell you over the salad course that they are in love with someone else, it is a recipe for weeks of hysterical sobbing, violent outbursts of anger, or even worse.  Getting fired can become a reason to race home tearfully, leap into bed, assume the prenatal position and turn the electric blanket up to nine.  Being foreclosed on becomes the gateway to not only the freedom of homelessness, but to the multitude of chemical substances that enhance life on the street.  All of this because our lives did not turn out the way we wanted them to.

Because we do not expect bad things in our lives, we are utterly unprepared for them when they happen to us.  People who have stockpiles of food and survivalist kits to survive nuclear war often can't handle the normal bumps in the road of life.  Armageddon yes, divorce no.  And this is all the result of misplaced optimism and the failure to accept the realities of life.

I want to be clear here, I am not advocating pessimism here.  I am not saying that we should all take Eyore's view of the world, and live under a permanent rain cloud.  What I am saying is that we need to adopt a realistic view of the world.  I will call it "Irish Optimism."

I was raised with a traditional Irish worldview, "hope for the best, but expect the worst."  In essence, I plan for the worst case scenario in every situation.  By doing that, I am typically happy with how things turn out because I know that no matter what happens, it is better than it could have been.  And in those rare cases where the worst happens, essentially going over the cliff strapped to the bomb, well, at least I have a plan for how to deal with it.

I get a lot of criticism from other people for my worst case scenarios, but it means that I am rarely incapacitated by the bad things that happen in life.  I may get angry or upset about them, I may even scream and yell, but then I get down to it and start trying to fix it.  I always have strategies for every situation, good or bad, and can quickly implement those solutions.

And as a result, I am generally a fairly satisfied person.  I don't want to use the term happy, because that term has been so devalued by modern society; satisfied and content are far more accurate terms.

If you had asked me when I was twenty where I would be when I was forty, I would have said I'd be a world famous architect.  If you had asked the same question when I was thirty, I would have been certain that I would be a tenured professor, and I'd be married with the obligatory 2.3 children.

None of this has happened, but I am still satisfied with where I am in life.  I am not homeless, divorced and paying child support for a kid I never see.  I don't have a severe or terminal illness.  I am not friendless and alone.  None of the worst case scenarios of life have happened to me.

I own a nice house that I love.  I just got my architect's license.  I have a great roommate who pays his rent on time and is good for talking about the implications of quantum physics.  I have a number of close friends who are like family.  I have some regrets, but I know how to learn from them and use them to my advantage.  Even though my life did not turn out in the way that society tells me it should have, and it is not anything that I would have come up with in an optimistic vision, I still find a great deal of satisfaction in it.

And this is the root of the matter, by accepting how life turns out, and not holding it to an optimistic ideal, I have shed expectations and can be pleased with how it has turned out.  This is not to say that I don't strive to make my life better, nor have I given up on goals and high achievements, I just accept that the good things in my life are the direct result of my actions and that I always need a plan to try to mitigate the inevitable bad things.

And in the end, I think the Optimism Delusion feeds the massive depression epidemic in this country.  People have unrealistic expectations, and if those don't come true, they fall into a funk.  Then, rather than try to change the situation, they dwell on how things didn't turn out the way they expected.  Ultimately, since they have no coping mechanism to deal with the failed expectations, they turn to the chemical mask of anti-depressants.

In the end, unbridled optimism has a high potential to make us depressed, and realism will ultimately make us happier.  It seems counter-intuitive, that being less optimistic will make us enjoy our lives more, but it removes unrealistic ideals, and allows us to focus on actual self improvement.  We make our own destiny, and by being realistic about the bad things that will happen to us, we can plan for them, and get through them with grace.

And in the end, that is how we can make our lives fulfilling.

The Health of Nations

Mandates

A Ipsos poll was recently released stating that 56% of all Americans are opposed to the Health Care Reform, but, paradoxically, most people strongly favor the provisions of that law.  In fact, the majority of people like everything except the individual mandate: they like the coverage for pre-existing conditions; the exchanges; the prescription drug relief; the ability to keep children on their parent's health care plan until age 26; even 72% of people like requiring companies with more than 50 employees provide health insurance.

And yet, 61% of all people oppose the mandate.

This is yet another case of people in this country wanting their cake and still being able to eat it as well.  It is a chronic problem in this nation; people who want all of the benefits, without having to share any of the pain.  We want tax cuts, but don't want any hits to services.  We demand cheap goods, but we don't like sending manufacturing to China.  We hate the deficit, but refuse to take any meaningful action to fix it.

The problem is, with the health care bill, the mandate is not severable.  I'm not talking about legally, the Supreme Court may find that they can chop out that one part and leave the rest intact.  What I'm talking about is the economic reality that the mandate makes everything else possible.

Let me explain.  For this example, I'll use the pre-existing condition ban, which is actually one of the most popular and necessary aspects of the law.  The harsh reality is that people with a pre-existing condition are going to cost the insurance company more than a healthy person.  They are ill, and that illness will require medical treatment, which in turn will cost money.  In fact, it will cost more money than they pay in through their premiums; if it didn't the people wouldn't need or want insurance coverage.

So in the end, these people cost the company money, but that's the way insurance works.  It is essentially a gamble that the company will take in more money than it pays out.  But unlike a casino, they have to pay out on policies, they are not allowed to do what casinos do and limit payouts to a percentage of what they take in.  Therefore, when there is a disaster, companies are on the hook for far more than people have paid in.  With health insurance, the idea is that the healthy people who don't need medical care fund the sick.  This is how the financial equation balances out.

But without the mandate, insurance companies will see a flood of medically needy people signing up and will, by law, not be able to turn them away.  In the end, there will not be enough low cost customers to cover the expenses of the high cost people.  Many of the other provisions will also add to this, but not necessarily as drastically as the ban on pre-existing conditions.

So in the end, without the mandate, there is no way to fund the rest of the law.  With a "free market," for profit insurance industry, the companies need the massive influx of healthy people to balance the costs out and remain profitable.  Without that income, health insurance companies will collapse under the immense weight of being required to insure people who are medically expensive, while not being given the ability to force healthy people into the system.

If they sever the mandate and leave the rest untouched, this will collapse the insurance companies and Congress will have to act, either to strike the rest of the law, or create some new mechanism to make it work.  If they strike the entire law down, health care costs will continue to soar, more people will not get treated, and again Congress will have to act.

This leads, ultimately, to four scenarios for health care in this country.  I will address each in turn.

The first is the "you're on your own" scenario.  In this future, people will be on their own for health care; insurance will become a luxury commodity, only able to be affordable for the wealthy.  In this concept, the government will play no role in health care, and will have no way to contain health care costs.

As a consequence, more and more people, especially the medically needy, will be forced to seek health care through the emergency room, which will force hospitals, not insurance companies, to bear the brunt of the costs of their care.  This will ultimately force health care providers into bankruptcy or will force laws to be passed allowing for the denial of care based on ability to pay.

In this future, we are looking at a very real likelihood of healthcare in America resembling that of places like Haiti, the rich get treated, the poor die.

Since that is probably an unacceptable situation in the United States, we will turn to the second option which is health care returns to a charitable enterprise.  For most of the history of our country, religious and quasi-religious institutions administered health care in this country.  You can see this in the names of hospitals, Saint Joseph's, Presbyterian, Lutheran.  They were named for the denominations that ran them. 

Similarly, most health insurance companies were non-profit.  I remember when Blue Cross and Blue Shield were 501 (c) (4) corporations, which means they were classified as social welfare.  They did not change to for profit until the tax reform of 1986 reclassified them, and in 1994, they became for profit institutions.

If health care returned to the hands of non-profits, they would have the backing of charitable donations and foundations.  A still functioning example of this is the Shrine Hospital system, which is funded by Freemasons and Shriners across the country.  Children in these hospitals do not pay a penny for their medical care. 

A health care system administered by charities would not be expected to turn a profit, and since there would be no profit in the system, there would be no incentives to inflate the costs of care.  By removing the profit motive, you would control costs.

However, this is also not a realistic solution.  Non-profits cannot compete in a for profit system; they can't attract the most skilled professionals or afford to keep up with the state of the art technologies.  The system is gamed against them, and the for-profits would not ever let them play on a level field.

The third option would be to keep the Obama health care plan's individual mandate.  While this will not control costs directly, it does create a large enough pool of healthy people to counterbalance the costs of the not healthy patients.  However, if the Supreme Court strikes the individual mandate, in whole or in part, this would require a constitutional amendment to impose.  Getting an amendment through the required number of states is even more unlikely than getting a 2/3's majority in congress, so this idea is dead on arrival.

The final scenario is ultimately the most likely, if the Supreme Court strikes down Obama's health reform.  Eventually the free market will collapse under it's own weight.  We are entering into a healthcare bubble, like the dot com bubble and the housing bubble.  Costs are rising far faster than inflation, and this is unsustainable.  Couple that with the fact that health care will be 20% of GDP by 2017, compared to manufacturing which is barely 15% and declining.  This indicates a high probability of the system popping, like so many of the other bubbles in the last decade.

Once the bubble pops, the government will have to step in.  Remember the banks and the auto industries that were too big to fail.  Health care occupies as much or more of our economy as those sectors, can we really afford to let the health care system go under? 

And once the system begins to unravel, there will likely be only one solution, single payer.  This is how health care is administered in most countries; the government provides the insurance for everyone, spreading out the risk and generating enough revenue to fund the system.

And if you think this is un-American, realize that Medicare is a single payer insurance system, and we love our Medicare.  Medicare works because, even among seniors, most people need minimal health care, and the ones that do are funded by those who don't.  The only real differences are that Medicare has a very low overhead, far lower than any private plan, and it does not have to be profitable.  It only has to cover the expenditures.

Ultimately, if the Obama health care reform bill fails, we will have to consider the single payer system, and since Medicare is already established and functioning, the best way to do it is to open up Medicare to everyone.  This will strengthen Medicare and provide health care for the entire country at a reasonable expenditure.

By killing the Obama plan, ultimately, we will have a single payer system, since it is the only realistic solution.  By fighting the Health Reform Law, we might get an even better system.

As a liberal, I recognize that if we lose the battle, we will ultimately win the war.  It makes me feel better to know that in this decision will be sown the seeds of destruction of the for profit health industry.

A Brief Lesson In Economics

Disparity

Lately, the news has been filled with stories about the rising gap between the average American and a wealthy American.  The net worth divide in this country is at its highest level since the Gilded Age, that beautiful time when Robber Barons sent private armies to kill union organizers, child labor was the norm, tenements were typical working class housing, and the average life expectancy for a poor person was roughly the same as in most Third World Countries.

To give you an idea of how extreme this gap is, currently in America, the top 10%  of the population control 80% of the wealth, and the other 20% has to be split up among the rest of us.  In hard numbers, that works out to a little over 3 million people controlling most of the nation's financial resources, and other 309 million of us have to fight over what is left.

On a side note, Teddy Roosevelt busted up the monopolies, created the Sherman Anti-Trust act, and in general brought an end to the Gilded Age.  More interestingly, he was a Republican.  Today, he would be exiled as a Communist.  And just so you understand where real Communists fall in the political spectrum, compared to them, Teddy WAS very conservative. 

To return to the point, this wealth gap in America is more extreme than it has been in over a hundred years, and it is getting worse.  This is also a global problem, but I am just going to focus on this country.

When you point out the facts that I have just laid out, you get accused of class warfare.  Pundit after pundit calls it jealousy for those who by their hard work make a success of themselves.  You hear that putting money in the pockets of the rich is a good thing for the overall health of the economy.  The Right claims that taxing the rich is what is stopping the recovery dead in it's tracks.

This is all lies.

I should point out that saying that is very dangerous.  Calling a lie a lie is the most forbidden thing you can do today.  No matter how outrageous the statement, you cannot call it a lie.

But it is, the income disparity in America, and the world as a whole, will ultimately bring down the entire system.  Even though Teddy Roosevelt ended the era of the Robber Baron, the system did not really right itself until the Great Depression, when the vast fortunes of the ultra rich vanished in a puff of smoke.

And perhaps that is what should have happened in the last meltdown.  If all the Wall Street Banks had gone broke, the income disparity would have been greatly reduced. 

However, it also would have meant that for the average American, the family pet would have become a dinner option, and the family car would have been a nice place to live.  So obviously, we could not let the system collapse, no matter how much it might have helped level the playing field.  We would have had an entire lost generation, just like we did for the entirety of the 1930's.  Remember, it took the massive industrial mobilization of World War 2 to completely wipe out the aftereffects of the Crash of '29.

That said, I would like to explain why income inequality is a bad thing, not just for those on the bottom, but for the country in general.  It boils down to one simple statement.

Wealth is a finite resource.

In that regard, it is no different from any other commodity, food, oil, precious metals, water.  There is a limited amount of it, and because of that, it functions just like any other commodity.  The more scarce it is when it is a vital resource, the more problems that situation causes.

Your parents may have made the statement, "Money doesn't grow on trees," when you wanted something that they couldn't afford.  My parents said it to me all the time and it was one of the most important lessons of my childhood.  Money is limited, which is a good thing.

If money was an unlimited resource, it would have no value at all.  That would lead to something called Hyperinflation, which is an even worse financial disaster than a Depression.  Hitler came to power in a country where literally a wheelbarrow full of money would not buy enough food to feed a family for a week, and the economic situation in Germany at the time was one of the prime causes of his rise. 

To understand how devastating hyperinflation is, imagine that you got a $1,000.00 check at 4pm today, with all of the purchasing power of $1,000.00.  By 5pm, it would only have the power of $800.00.  By the next morning, if you kept it, it would only buy what $100.00 bought when you got it.  By the time 24 hours had passed, it would be essentially worthless, maybe a few pennies, but no more.  This is what happened at the end of the Weimar Republic, and set the stage for the Nazi Party.  (And Godwin's Law strikes again)

But the point of this is, when you flood the system with newly printed money, it does not add capital to the equation, it devalues the money.  If everyone had a million dollars, a million dollars would not have any value.

So to sum up this point, money is a limited resource, and must remain so, in order to retain it's value.

Moving on to why economic disparity is a problem; when the limited resource called money gets concentrated in the hands of a few, for all intents and purposes, it gets taken out of the system.  It gets locked up and not used.

In essence, this is similar to the O.P.E.C. oil embargo of the 1970's.  The oil producing countries decided as a whole to stop selling oil to America, and hold on to it, which brought the economy to a literal halt.  Rather than doing anything else with a Saturday, you would wait for hours in a gas line, hoping that there would be some left by the time you got to the pump.

Now we are facing a monetary embargo by the wealthy.  This is not necessarily a deliberate embargo, although some of it is probably politically motivated, but it is an embargo nonetheless.

The reason for this has a simple explanation; rich people cannot spend enough to keep the economy moving.  Remember, 3 million people possess 80% of the wealth.  To put this in context, in 2011 alone, almost 13,000,000 new cars were sold.  If the wealthy were the backbone of the economy, this means that every single person in the top 10% would have to buy four cars every year for the rest of their lives to keep the auto industry afloat.

This is why the wealthy do not drive the economy, and why the wealth gap is a problem.  When the money concentrates in the hands of the few, it stops there, because they do not need enough stuff to keep people working.  No one needs four new cars every year, so that money just sits there.  They cannot spend enough to make up the difference, but that money is taken out of the hands of the bottom 80%.  Remember, it is a limited resource, you cannot add new money into the system without devaluing the existing money.

As the process continues, when consumption drops, the need for production drops at the same rate.  This results in layoffs, which cause further drops in consumption because more money is taken out of the system.  It becomes an accelerating trend, the less that is spent means that there will be less to spend down the line.

And the wealth continues to concentrate, which in the end will destroy the economic system.

There is a dark irony here, the concentration of wealth, which is the goal of individual capitalistic impulses will ultimately destroy the capitalist system as a whole.

It would be hilarious if the toll it exacted on the rest of us wasn't do devastating.