Robert Shiller’s recent article, Challenging the Crowd in Whispers, Not Shouts, addresses the phenomenon of Groupthink in understanding speculative economic bubbles. Groupthink is a concept developed by Yale psychologist Irving L. Janis to understand why “experts” fail to speak out publicly to warn that the speculative bubble will burst. As described in the article, Janis’ theory as applied to panels of experts is as follows:
“People on these panels, he said, are forever worrying about their personal relevance and effectiveness, and feel that if they deviate too far from the consensus, they will not be given a serious role. 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.”
Shiller then applies this theory to his own personal experience in warning against the speculative housing and credit bubbles:
“From my own experience on expert panels, I know firsthand the pressures that people — might I say mavericks? — may feel when questioning the group consensus…. In addition, it seems that concerns about professional stature may blind us to the possibility that we are witnessing a market bubble. We all want to associate ourselves with dignified people and dignified ideas. Speculative bubbles, and those who study them, have been deemed undignified.”
The concept of Groupthink explains a lot about this election. We are witnessing in Obama a huge speculative bubble. Whether you like Obama’s social and economic ideas or not (I don’t), no person can live up to the hype which has surrounded Obama’s candidacy. I will go out on a limb here, and predict that if elected Obama will not cause the oceans to recede, will not stop global warming, and will not cause us all to sing in joyous harmony.
The Groupthink phenomenon, however, has more pernicious implications in this campaign. The very groups of “experts” who should be speaking out against this speculative electoral bubble — the press and academics — are afraid to do so for fear of being marginalized and deemed “undignified.” The Groupthink phenomenon has been made all the worse by the intimidation tactics of the Obama campaign and its supporters whereby those who dare to ask hard questions are vilified and ostracized.
It has been left to the fringes of the press and academia to challenge the unsustainable assumptions of the Obama campaign. I feel like Robert Shiller felt watching the speculative housing and credit bubble rise. Critics and skeptics aren’t being taken seriously because “[t]he notion that people are making huge errors in judgment is not appealing.”
When this bubble bursts, I will be able to say “I told you so.” Unfortunately, by that point in time, the damage will have been done.