A provocative new book argues there is a correlation between mental illness and successful leadership.
Psychiatrist Nassir Ghaemi sums up his thesis like this: “Mental illness enhances leadership in crisis situations.”
From here. Not sure where to start here.
Gretchen Morgenson, a Pulitzer Prize-winning reporter for The New York Times, and financial analyst Joshua Rosner have written an engaging and insightful analysis of the subject.
The authors argue that while there is plenty of blame to go around, the major culprits are the past leaders of mortgage buyers Fannie Mae and Freddie Mac and the politicians who pushed for an increase in homeownership, with little regard for possible collateral damage.
From a book review in the May 30 Boston Globe. I admit with embarrassment, I’ve always been puzzled as to what caused the financial crisis, or even what the crisis was. But my lack of any firm explanation in my head doesn’t help me follow Morgenson and Rosner’s argument, at least as it comes through the review. Let’s try to unpack the model, such as it is.
More Homeownership => Financial Crisis
Too simple, right? Well there is one intermediate step I seem to remember.
More Homeownership => More Subprime Mortgages => Financial Crisis
Hmmm…I’m still not seeing the mechanism. I’ll try to dig deep into my memory of 2008, and all the documentaries I’ve watched on this topic since then, which weren’t actually that helpful in explaining what happened.
More Homeownership => More Subprime Mortgages => Banks Doing Crazy Stuff => Banks Fail => Financial Crisis
So I wonder if these authors are focusing a little too much on the consumer side of the problem. I also wonder if their work plays into the argument that the crisis was a result of the government being too responsive to the needs and wishes of the poor. Yes, apparently that view is out there, being put forth by respected economists. See this MIT news story, and the accompanying slides, about Daron Acemoglu (note that Acemoglu is countering this view, drawing on work in political science).
What I also found interesting in this piece was this bit about the role of economists:
They note that many of the policies aimed at increasing homeownership were designed to counter existing policies that were believed to discriminate against minorities. A widely heralded 1992 study by the Boston Federal Reserve found evidence that racial discrimination among mortgage lenders in Boston was pervasive.
Fannie and Freddie used the report, which was based on data supplied by the lenders, as a reason to launch widespread outreach efforts to minority communities and encouraged other financial institutions to do the same.
However, upon closer examination of the study several economists discovered important flaws. These included failing to consider whether rejected applicants met the lender’s financial requirements and using an analytical method that oversimplified the mortgage application process.
That last paragraph is hard to unpack, but it sounds like the economists tried to correct for selection bias or something.
Q. It seems like everyone has an opinion about what pregnant women should or shouldn’t be doing.
A. Pregnant women can’t avoid these messages. If you don’t hear them on the radio or TV or the newspaper, your friends and your parents and even helpful strangers on the street will let you know. [My feeling is] if we’re going to be bombarded by this information, better to understand it.
Q. It seems like every week there’s new research about pregnancy, but much of it seems to contradict last week’s new research about pregnancy.
A. Following the research moment-by-moment can be very confusing. But I think there are some general principles that the lay person can use.
From a May 23 interview with author Annie Murphy Paul in the Boston Globe.
It’s the age-old nature-or-nurture debate. Ms. Chua clearly favors the nurture side of the equation (if her heavy-handed approach could be described as “nurturing”). Mr. Caplan, who has already been dubbed the “Un-Tiger Mom,” writes, “While healthy, smart, happy, successful, virtuous parents tend to have matching offspring, the reason is largely nature, not nurture.”
Though Mr. Caplan’s prescription for an increased birthrate is a new twist, variations of the argument have been made before. In the mid-’90s, Judith Rich Harris wrote in “The Nurture Assumption” that peers have a much greater impact on children than parents do. More recently, in “Freakonomics,” Steven D. Levitt and Stephen J. Dubner wrote that “it isn’t so much a matter of what you do as a parent; it’s who you are.”
So writes Motoko Rich in the New York Times. In general I thought this piece was okay. It is a little unfair in that it equates Amy Chua and economists like Levitt and Heckman in terms of their credibility on the subject. But on the other hand, the research on this question doesn’t seem entirely conclusive, so it may be the economists’ own fault for the confusion.