Last Sunday we saw Charles Fergusson’s Oscar-winning documentary “Inside Job”. The film documents in great detail the evolution of the financial disaster that caused incalculable damage to the economy, and enormous harm to millions of individuals in this country and around the world. As I watched the parade of “leading lights” economists (Robert Rubin, Larry Summers, Alan Greenspan, Henry Paulson, Ben Bernanke) and politicians (George W. Bush, Bill Clinton) who led us into this disaster, I was wondering –how can they sleep at night knowing what they have wrought. All of them declined to be interviewed for the film. But in their public statements one could not detect the faintest echo of contrition, or even an academically neutral acknowledgement of error. Your blood boils when you hear Paulson, the treasury secretary and before that chairman of Goldman-Sachs, claiming that “I had to deal with the hand I was dealt” (the person sitting next to me blurted “ass…e, it was your own hand you were dealt”). Or Larry Summers, a brilliant Harvard economist and blow-hard par excellence, haughtily mocking an IMF economist who presented a paper presciently describing the coming disaster in accurate detail two years before it occurred, calling him a Luddite in front of the whole conference. Any apology from the learned professor? Don’t hold your breath.
But your sense of fairness is really offended when you see the bankers and traders walking away from the wreckage with billions of dollars in their pockets, while the hapless multitudes are left jobless, homeless, psychologically devastated. And nobody went to jail!
But wait, justice was done, somebody did go to jail. In his 3/25/2011 column in the New York Times Joe Nocera tells us about our relentless prosecutors at the Justice Department who went after one Charlie Engel (see picture of Charlie climbing Half Dome in Yosemite) who was sentenced to 20 months in jail. Never heard of Mr. Engel? Neither did I, because he is not an economist, not a trader, not a corrupt politician. Mr. Engel was convicted for mortgage fraud because he signed “no-documentation” mortgage applications that overstated his monthly income. Those so-called liar mortgages were aggressively pushed by brokers, because they made unconscionable profits from the fees they collected for each such application. And who was the broker? Countrywide Financial, which made billions of dollars in profit before the bubble that it was in large measure responsible for, collapsed. Mr. Angelo Mozilo (see picture below), Countrywide’s CEO and architect of those “liar mortages” walked away with a compensation of hundreds of millions of dollars for his troubles. When Bank of America Corp. bought the struggling Countrywide, Mozilo still took home about $44 million — on top of the $140 million in Countrywide stock he sold off during 2006-7.Nocera concludes with the wry remark: “ Angelo Mozilo ought to get a good chuckle out of that one”.
Are you outraged yet? And what is it about fairness that evokes such emotional reactions?
The Neurobiology of Fairness
Fairness is a trait that has been demonstrated in several species. Toddlers already demonstrate a high sense of fairness. But so do chimpanzees. Even dogs where shown in a scientific experiment to possess a sense of fairness. What is the evolutionary reason for acquiring a sense of fairness? Just imagine social animals that lack any sense of fairness –they would not be social for too long. The “connective tissue” of any society, human or non-human, is the fair treatment of its members. Psychological experiments have demonstrated that members of a group who perceived that they were treated unfairly tended to punish the offender severely even if it meant great economic loss to themselves. Anthropological research of several cultures revealed the same taboo on unfairness. It is apparently hard-wired into our brains.
Indeed, in 1999 a certain type of neuron, called a spindle cell (because of its shape, which is different from other neurons) has been found in great concentration in an area of the brain called the ACC (anterior cingulate cortex), which lies roughly at the area of the temple, right behind the prefrontal cortex, and is responsible for stimuli coming in from, and reacting to, the external environment. Recently, these cells were found in other areas close to the frontal cortex, as well as in the prefrontal cortex proper. These spindle-shaped cells, , also called VEN cells (Von Economo Neurons, after their discoverer), are especially numerous in humans, but are also found in non-human apes, some monkeys, elephants, whales and dolphins. What’s common to all these animals? They all have a large brain, they are intelligent, and they are social. And this led to the suggestion that spindle cells are an evolutionary adaptation permitting fast information processing and transfer along highly specific projections, and that they evolved in relation to emerging social behaviors. A quick look at the structure of a spindle cell, with its few, but very long projections (neuron on the right) as opposed to the common “pyramidal” structure (on the left) demonstrates the anatomical basis for this theory.
Why should sociality require special neurons, structured to deliver fast information over large distances? Because social environments are infinitely more complex and fast-changing than the physical environment. The individual is constantly monitoring cues received from other members of the group. He constantly gauges the moods, intentions, subtle changes in relationships, tone of voice, glint in the eye, body language. And this stream of constantly-changing information requires bandwidth of transmission that is much larger than non-social animals have.
VEN cells function as gate keepers. They receive emotional input from the amygdala and higher emotional centers, as well as cognitive information from several cortical areas, including the hippocampus. They filter it, focus it, and present it in sort of “executive summary” to the CEO, the prefrontal cortex. And so, when the social animal perceives an act of unfairness, the VEN cells become highly activated, as seen in fMRI studies. In a sense, they become agitated, and an urgent message is delivered to the prefrontal cortex –unfair!
Do you feel a bit uncomfortable if your boss asks you to present false information to a business associate? Smokers know that it’s bad for their health, yet they continue doing it. So do alcoholics, or drug addicts. They all experience psychological dissonance: the uncomfortable feeling of holding conflicting ideas simultaneously.
One would expect that VEN cells, being associated with intelligence and social behavior, should also be involved in psychological dissonance. Indeed, in 1999 Allman and his colleagues showed that VEN cells in the ACC send signals to an area in the frontal cortex (Brodmann area 10), where regulation of psychological dissonance occurs.
Sometimes the psychological cansequences of cognitive dissonance conflicts can be quite severe: depression and even suicide. There is therefore a survival value to dealing with the problem. Remember Aesop’s fable about the fox and the grapes? The fox desires the high hanging grapes but cannot reach them. So he rationalizes that the grapes are probably sour; end of conflict, smart fox. Smokers deal with their conflict by rationalizing that “you live only once”, or “not everybody dies of cancer” or “Churchill was a smoker and died an old man”. Alcoholics rationalize their behavior by “I handle it well” or “Churchill used to drink a lot”. Poor Churchill, what a legacy to leave behind after saving the free world from Nazism.
How do we deal with unfairness?
We feel rage, we protest, we punish, or…we rationalize and acquiesce. Which brings me back to “Inside Job” and the unfairness in society.
Our VEN cells have done their job well. We were angry at the glaring unfairness of crooks getting rich, and getting away with it. We were enraged by the utter devastation and human suffering they left in their wake. A classical case of psychological dissonance. How did we deal with it? The CEO sitting in the prefrontal cortex assimilated all the incoming information. Banks use their money to buy our legislators, frustrating any attempt to legislate effective regulation of their practices. Huge corporations are drowning the electoral process with a tsunami of cash, aided and abetted by every branch of government, including the Supreme Court. Almost daily revelations from Wall Street tell us that the game is rigged. Are we any match against these forces? The rational conclusion is that we are not. So we rationalize, to reduce the dissonance for the sake of our psychlogical well being. This is why there are no mass protests, why people on the political right lash out at the poor and dispossessed, why most of us simply tune out because of the futility of it all.
Which is exactly where they want us.