Caxton Press, 2010
First published in 1954 and updated in subsequent editions by the author until 1963, this book predates various observations and topics of modern behavioral economics.
To understand and appreciate it, you need to keep in mind it was written during the era when Keynesianism was ruling undisputed (roughly from 1945 to 1973), and both social scientists and policy makers were thinking of the prosperity puzzle as solved and of human economic activity as predictable.
Neill was going against the grain, part of a skeptical minority. This also explains why he doesn’t seem to apply the same strict contrarian rules to his own ideological biases – which become obvious in some black-and-white thinking passages (other than when he self-describes as “Libertarian”, “conservative”, “realistic reactionary”, and when he cites, p. 150, “Ayn Rand’s wonderful new book, Atlas Shrugged” – ugh).
The book is heavily and explicitly influenced by Extraordinary Popular Delusions and the Madness of Crowds (Charles Mackay, 1841), Les Lois de L’Imitation (Gabriel Tarde, 1890), and Gustave Le Bon (La Psychologie des Foules, 1895; Psychologie du Socialisme, 1896).
The edition I bought (6th ed., Caxton Press 2010) has way too many typos – the editors did a poor job.
Some key passages:
The public is perhaps right more of the time than not. In stockmarket parlance, the public is right during the trends but wrong at both ends!
One can assert that the public is usually wrong at junctures of events and at terminals of trends.
So, to be cynical, you might say, “Yes, the public is always wrong when it pays to be right – but is far from wrong in the meantime”. […]
The “time element” is the most elusive factor in economics. We need to get that fixed firmly in our minds. (Insofar as I am aware, there is no known method of timing events or trends).
Therefore, when we adopt a contrary opinion, as a guide, we must recognize that we may be too far ahead of the crowd. This is because economic trends often are very slow in turning, or reversing.
Students of crowd psychology know that the average voter pays scant attention to the fundamental facts concerning either the candidate or the platform. He accepts “what he feels”. The forces of suggestibility and contagion form the image in his mind.
Mystery is an al-powerful tool. “Tell ‘em nothing and promise ‘em anything”, counsels the politician; “and, above all, never reason with voters; affirm but never explain; repeat what you’ll do for ‘em, but never argue”.
The aim of this writer’s contrary comments is to proffer interpretations in the field of economic psychology, still largely unexplored. One does not find, for example, the title “Economic Psychologist” used as yet. The few writers who are paying serious attention to the study of human behaviorism and its influence upon economic trends refer to themselves as sociologists, economists, or psychologists.
However, it is evident from studies and papers presented in recent years – and from the surveys of consumer intentions and attitudes which have been conducted for the Federal Reserve Board – that the field of economic psychology is one in which serious concentration will be focussed in coming years. […]
So, while we cannot foretell the future, we can be confident that economic psychology will be a required subject for study as we learn more about economic trends and cycles – and what starts and stops them.
However, we need not to be too discouraged, it seems to me, because the whole field of economics remains a “guessy” one. Little, if any, progress has been made over the years in attaining profitable accuracy in economic forecasting. And, mind you, this condition still exists, notwithstanding the extraordinary volume of statistics that is now available to students and which was not known to former forecasters.
It seems to me that the long history of economic forecasting clearly demonstrates that “psychology” is the missing key. You may have all the statistics in the world at your finger tips, but still you do not know how or when people are going to act. Accordingly, the statistics frequently lead you astray.
A basic usefulness of contrary opinions is to guard against predicting the unpredictable; or, to put it another way, to avoid being ensnared by faulty general predictions. […]
I believe it is correct to say that the theory [of Contrary Opinion] is more valuable in avoiding errors in forecasting than in employing it for definitive forecasting.
Making predictions has become a mania. Practically all economists are called upon for their future views – and many go out of their way to write articles and make speeches about “what’s ahead”. […]
But the significant fact for us to hold before us is that the more prominence predictions receive the more inaccurate they are likely to be. […]
If you believe the predictions, you go against them to protect yourself. Thus, you help the predictions to go haywire.
Most of us can’t stand being alone more than half an hour, and our idea of reflection is merely to reflect and repeat what someone has told us! (We’re imitators, that is.)
[Entrepreneurs] built so fast and furious that their second step – of combining enterprises and pyramiding one on top of another – has led to the submersion of individual effort and the fostering of group effort and the conformity of the individuals to a mass pattern. […]
Business organizations have become too large for individual management. We have entered the era of group management. Mass conformity has, naturally, gone along. […]
May it not be that cyclical movements will be of greater (rather than lesser) intensity in the future, because of this development of mass conformity?
It takes us average humans a considerable interval to shift our viewpoints, once we have established a given mental outlook.
That is, if we have (mentally) accepted a trend as moving in one direction, we are not inclined to change our outlook until well after the trend turns. […]
However, if we adopt a contrary course and try to anticipate a change in the current, we’re more likely to recognize the signs of an approaching whirlpool or precipitous drop than if we merely assume that if the river is smooth here it must be smooth all the way.
As you browse over the opinion which have been published through the years – in eras of good times and bad – you are struck over and over again by how often the prevailing conditions produced the opinions; […] Little effort was made to analyze what had happened previously – things which would cause a change in the future.
When economic affairs are booming and “everybody” feels cheerful, optimistic, and prosperous, no one wants to hear disparaging remarks or bad news about how things are going. […] If someone suggests that booms and periods of optimism always overshoot the mark and bring about corrective reactions, that said someone is called a “prophet of gloom”. He is politely (or unpolitely) told to shut his pessimistic mouth. […]
At another time, when the economy has been slumping and “times are bad”, then the opposite psychology prevails. People […] get into the frame of mind that allows them to believe that everything is in bad shape. What is more, they expect things will remain that way. […]
Rut-thinking is a common trait. I have said that the art of contrary thinking may be stated simply: thrust your thoughts out of a rut.
The “crowd” is most enthusiastic and optimistic when it should be caustious and prudent; and is most fearful when it should be bold.
I’m confident you are aware of how different a wellthought-out opinion is from one that is caught on the fly, so to speak, or one that is merely a reflection of a crowd’s fears or hopes. An individual may think out his opinions, whereas a crowd is swayed by emotional viewpoints rather than by reasoning or reason-why arguments.
Emotional and thoughtless opinions spread widely from imitation and contagion.
Being positive, specific, and dogmatic is about the most harmful habit one can fall into. […]
The value of the contrary approach is the opposite. It prevents one from being a dogmatist; one avoids being positive about conjectural matters; as one reads, he mentally needles the writer or commentator.
Instead of leaping abruptly from affirmation to its opposite (from general opinions to contrary opinions), we need to consider the synthesis (combination) of parts of general opinions and their opposites. […]
Take the leap from the General Opinion to its Opposite (or from affirmation to negation) and then, from the ideas thus released, work back to a speculative and reflective conclusion, or synthesis. In this way, we may avoid denying facts which are elements in the generalized opinions we are analyzing contrarily.
It is evident, I think, that propaganda, skillfully engineered, manipulates opinions. […]
We are now witnessing, and shall increasingly experience, “thought and desire manipulation” which is almost firghtening to contemplate. I do not hesitate to assert that contrarianism offers protection against the Depth Manipulators.
Remarking that to be able to be caught up into the world of thought – “is to be educated”, Miss Hamilton emphasizes that the Athenian method of education was not geared to mass production. It did not produce people who instinctively all went in one way, and were conformists. There were countless contrarians in Greece back in Socrates’ day.
Many devotees of chart reading, for forecasting stock prices, subscribe to the idea that a chart is worth a thousand words of analysis and statistics. Permit me to twist this around. I maintain “the right contact is worth a thousand charts”.
The sameness of writings on business, finance, and economics – and of course on the stock market – is such that it is almost impossible for an individual to think for himself. He is brainwashed.
The protection against brainwashing is contrary brainwork. It is hard work to think, but it is worth it.[…]
If Washington experts appear before our television screens with brave predictions of things to come, let us not forget that they are there to persuade us to think their way. The open-mouth policy is a scheduled phase of modern government.[…]
There is one noticeable trait – a paradox – that is pertinent to today’s trends of opinions: a) A person is commonly slow to change his mind, while being b) Quick to pounce on a new fad or shift to a new fashion.
Which is to say we are quick to conform, but slow to differ.
It seems impossible that in the gret Tulip Mania in Holland in 1640 the human herd could be such utter fools as to bid up tulip bulbs to 5500 fiorins each (equal to approximately $3,000) and crack a nation’s banking system in the process.[…]
And did it really happen in our lifetime that clergymen demanded “a life (sentence) for a pint”; and the confiscation of automobiles and the closing of huge hotels for what is now completely legal?
When mass manias are tied to a personality (Napoleon), patriotism (war), or God (the Crusades, or witchcraft), the hypnotic contagion of the crowd has no limits. It must wear itself out, as in the case of the Crusades, that took two hundred years.