Why capitalism likes us to behave irrationally

It’s a great irony that although human beings, as distinct from other animals, are characterised by their ability for rational thinking, so much of our behaviour is irrational. This contradiction has been unashamedly exploited by big businesses in marketing their products as well as by politicians trying to persuade us to vote for them. We are sometimes our own worst enemies because of this.

Understanding in what way and why we are irrational would help us avoid the worst pitfalls. It has been amply demonstrated that most of us, under no outside pressures, would behave according to social norms we have learned from the society around us. Thus most people in most circumstances wouldn’t steal, aren’t dishonest and would express solidarity with others. This was very well demonstrated in the former socialist countries, where social behaviour was the bedrock of society and the sudden introduction of market values after 1989 came as a profound shock. People were no longer sure how to behave and became easy victims for unscrupulous exploiters.

Most of us can be persuaded to abandon our social behaviour under certain circumstances and adopt irrational ‘market norms’. Let me demonstrate this with a key example. Few of us today can be unaware of the potential dangers of climate change to the very existence of mankind, however many if asked by pollsters on the street whether petrol should be taxed more will counter vociferously and argue instead for a cut in petrol taxes and for the maintenance of cheap airfares. Instant gratification (our animal instinct) takes precedence over essential long-term planning (what our rational mind should be telling us).

Psychologists have shown that when making choices in life our brain differentiates between so-called inter-human choices and those that are deemed to be purely economic or consumer ones. When making the former, our morality monitoring system is engaged, whereas when making the latter, we often disengage it.

This partly explains why markets are run largely on a mercenary basis, ignoring their impact on the lives of our fellow human beings; it explains the widespread immorality and callousness of bankers and hedge-fund operators.

Human beings also have a strongly inbuilt reluctance to kill or harm their fellow humans, and in order to overcome such essential social behaviour, these deep and rational feelings have to be ‘deconstructed’. This is what armies have to do in order to train soldiers. That’s why they first destroy a recruit’s individuality, his civilian value system, sense of self-worth and his rational concept that killing is wrong. It’s also the reason they show or allow recruits watch violent and pornographic films to desensitise them and turn them into killing machines. Brecht demonstrated this so magnificently in his play ‘Man is Man’. Irrational violence replaces feelings of human solidarity.

As Freud pointed out, we all internalise certain social values and these will normally hold good in most circumstances unless we come under undue pressure and temptation. Doing good stimulates the rewards centres of our brain, but this can be overridden given the right triggers.

Coalition cuts now being made to childcare, pensions and working conditions also come at a heavy cost to our social fabric. Additionally, they affect workers’ productivity as well as their sense of collective responsibility and of service to society. Workers are often prepared to work longer hours or increase production if it is seen as for the good of society and their fellow workers, but if they are treated only as mercenary employees, they will then behave as such. For the duration of our lives we continuously enter into social relationships, but on occasions we also enter into purely ‘market relationships’ i.e. when we buy goods or someone buys from us. Our behaviour will be conditioned by whichever situation we think we are in.

Since Thatcher, who notoriously said ‘society doesn’t exist’ relationships that were primarily social have become increasingly transformed into purely impersonal monetary ones. Whether in education, healthcare or even in soliciting help or advice, all is being reduced to a financial transaction and the social element becomes marginalised. Performance-based salaries, targets, test scores and league tables for schools, all undermine social relationships, replacing them with monetary or statistical values.

Organisations, businesses and institutions used to talk of corporate loyalty, which was important to them. Most workers in the health service or education carry out their jobs as a public service they are proud of that. Of course they are paid for doing their jobs, but payment is often less than they could earn elsewhere in the private sector. It is their sense of public service, the rewards they received in terms of social status, gratitude, warmth, collegiality and generosity that gives them their sense of worth. Once you reduce all that to a purely ‘market’ relationship any sense of a wider loyalty will go by the board.

Even Ed Miliband in a recent speech (Guardian November 18, 2011) stressed that ‘the morality of markets is fast becoming the next battleground of politics’. He went on to argue that a more moral, less predatory capitalism is also a more efficient one. This is undoubtedly true, but capitalism by its very nature, based on the profit motive, cannot become ‘moral’. The independent High Pay Commission in a recent report also stressed that inflated rewards for top bankers and businessmen lead to an ‘erosion of trust in the private sector’. Social behaviour is, of course, based largely on trust; once that is eroded, we do have a breakdown of such behaviour.

Capitalism plays on our irrational urge of wanting immediate gratification. Although we know rationally that by taking credit we are only delaying the painful payment process, and being required to pay more in the end, but our irrational selves take over and we do it anyway if the temptation is made attractive enough. Like ‘free trial’ periods for goods. The sales people know that once we have an item in our possession we are unlikely to give it up and send it back, whereas if we were told we had to pay upfront, we would seriously consider whether we actually want or need the item and also if we can afford to pay for it.

The sophistication of marketing today, with all the latest psychological insights at its disposal, can turn almost anything into a tempting opportunity – a must have possession. Advertising aimed at children and their parents implies that if you don’t purchase a particular toy for your child, then your love is deficient, thus manipulating our consciences and sense of love and duty towards our children.

In his book ‘Escape from Freedom’ Erich Fromm wrote that in a democracy people do not lack opportunity, but a confusing abundance of it. We are continually reminded that we can do anything and be anything we want to be. The problem is living up to this dream.

Although we all are fundamentally rational, our deeper-seated animal instincts can be played upon to ensure we make irrational decisions, particularly by those forces that see a quick profit in such irrationality. The only way to counter this anti-social system is to start in schools by helping students develop strategies and tools for making better and more rational decisions in their lives.

The morality of markets is becoming a battleground for politics. Those who believe you can reform capitalism, like Miliband, argue for a more moral and less predatory capitalism. They maintain, not without a certain justification, that a more moral capitalism would also be a more efficient one. It has been amply demonstrated that when workers are treated with respect and dignity, rather than as cogs in a wheel, they will give more of their energies and commitment to the companies they work for.

The flaw in this reform argument is that the very logic of capitalism, with its inexorable transformation into a globally finance-dominated system, is incapable of delivering such an ethically-based system. Trust is one of the strongest of glues binding individuals and communities together; without trust, all forms of human relationships would break down. We have seen a catastrophic erosion of trust in our societies over recent decades – from politicians, journalists to bankers – and this is having a chronic and deleterious impact on our societies and on individual behaviour. It is irrationality on a global scale and at its most crass.

A version of this article appeared on www.morningstaronline.co.uk on December 11, 2011.

The idea for this article was born after reading Dan Ariel’s extremely illuminating book, Predictably Irrational: the Hidden Forces that Shape our Decisions (Harper Collins 2010)

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This post was written by John Green