Not Only Crazy People Believe Crazy Things

Rather awkwardly for the evangelist who said the world would end Saturday, it did not. But Harold Camping is an irrepressible fellow and, after further study, he announced that he was merely off on timing. The world will end Oct. 21. Really.

The purpose of this column is not to have a laugh at poor Mr. Camping, tempting as that is, or to boast that I predicted both outcomes, which I did. It’s to remind people that this is much more than a silly little story about a kook and the people who believe him.

Harold Camping and his followers are not insane or unusually stupid. They are ordinary people. I’m sure some are quite intelligent. But smart or not, ordinary people find it very difficult to admit, even to ourselves, that a sincerely held belief is wrong. That’s especially true when our commitment is substantial. We ignore evidence. We make excuses. We twist logic. We rationalize like crazy. Whatever it takes, we find a way to safeguard our cherished belief and cling to what should be discarded – unless we learn to be as critical of our own thinking as we are of others.

This is Cognitive Dissonance Theory 101. Listening to the radio while driving home Monday, I heard a perfect illustration.

Mockery of Harold Camping was all over the dial, of course. But then I happened to catch investment adviser John Budden on CFRA, who was talking about something called “the Kondratieff cycle” and what it revealed about our economic future. I smiled. The juxtaposition was too perfect.

Nikolai Kondratieff was a Soviet economist of the 1920s who looked at a little more than 200 years of price and production data in various countries and concluded there was a recurring wave in capitalist economies that rose and fell over a period of about 50 years. The “falling” part was acceptable to the Soviets. The “rising” part wasn’t. Kondratieff was executed in 1938.

Few mainstream economists in the 1920s accepted Kondratieff’s observation. Even if the pattern he perceived was real, he could only show it completing two- and-a-half waves. It might be nothing more than coincidence. But Kondratieff was convinced the wave was real and he believed it would soon enter the trough, meaning economies would fall into a depression in the 1930s. When the 1930s did indeed bring a depression, some mainstream economists were convinced. One was Joseph Schumpeter, who developed an elaborate system of cycles with Kondratieff’s long wave at its core. But that was the high-water mark of Kondratieff’s influence in mainstream economics. Schumpeter’s cycle theories never made any headway. Kondratieff’s theory faded.

But then came the 1970s and simple addition brought Kondratieff back into fashion: Add 50 years to the date of the stock market crash that ushered in the Great Depression and you get 1979. Investment banker David Rosenau and journalist James Shuman – who would go on to work in Gerald Ford’s White House – issued the warning in their 1972 book The Kondratieff Wave. But things weren’t all grim, they added. True, the 1980s would be like 1930s. But the 1970s would be like the 1920s, and the 1920s had roared. Thus, the authors concluded, the turmoil of the late 1960s would soon decline. So would inflation, unemployment, and crime. The 1970s would be a decade of “high prosperity, full employment, no inflation, and peace and plenty.”

If that did not come to pass, the authors said, “it will mean that the Kondratieff wave is only a statistical illusion.”

It did not come to pass. The 1970s was a miserable decade. High inflation, unemployment, and crime. Low growth. Moribund stock markets. So the Kondratieff wave was only a statistical illusion, right?

Of course not. As the 1970s sank into “stagflation” and pessimism, Kondratieff became more popular than ever. Amid the gloom of 1974, the historian Geoffrey Barraclough reviewed Rosenau and Shuman’s book, along with many others, in the New York Review of Books, and confidently concluded that the Kondratieff cycle was real and, as bad as things were, they were about to get much worse. In a 1976 book, investment adviser Joseph Granville used Kondratieff to predict a crash and a depression, beginning in 1983.

As it turned out, a long boom started in 1983 but the Kondratieff devotees were not impressed. Investment adviser Robert Beckman predicted that “the Second Great Depression” – “far worse than that of the 1930s” – would hit in the mid-1980s.

There was no depression in the mid-1980s. But again it did not matter. In 1985, Joseph Granville published another book in which he explained that “the length of the (Kondratieff) cycle could vary between 48 and 60 years” and so the fact that he had predicted a depression would start in 1983 didn’t mean he was wrong. After all, the economy had boomed during the 1920s, before crashing. Hence, despite outward appearances, Granville was right.

There are literally dozens more stories like this, through the decades, but still the believers cannot be convinced they are wrong. They are committed to the Kondratieff cycle, just as fierce partisans are committed to political parties, and Harold Camping is committed to the End Times.

Incidentally, the reader may have noticed that a remarkable number of the Kondratieff devotees in the past have been investment advisers. The same is true today. Indeed, there’s a not insignificant probability that your retirement plans hinge on the judgment of someone whose faith is as blind as that of Harold Camping.

Which is more frightening than anything old Harold says.