Halo Effect

I’ve been thinking about that sensational, bail-out E-mail last week. I think that a huge part of the problem is our inherent self-assessed virtue. Therefore, if we are good, hard-working, etc. and something bad happens (e.g., 401k balances sharply decline), there must be something or someone that is not good that is causing it.

Might part of the problem be our own foolishness for buying stocks at unreasonable P/E ratios? Might there be within us some opportunism or greed?

Well, yeah, but I’m a good person, right? Everyone has a mortgage that they can’t pay off today. I didn’t cause this mess. Yeah, I was hoping for a good return on investment and wanted to raise my family in a decent home, are those sins?

I’m not saying they are; I’m just drawing attention to the human reflex to assign blame rather than accept it. Besides, explanations of a market fall or a credit crisis that involve speculative buying and overextension seem more plausible to me than “smoke-filled back rooms” and crooked politicians. (And even if there are, wouldn’t they also consider themselves “good folk” with just a touch of opportunism and greed?)

I’m reminded of a psychological phenomenon we discussed in graduate school; everyone’s tendency to mentally mitigate their own vices and maximize vices of others. The result is that everyone feels that they are “better” than most people, especially in immeasurable and subjective things like morality or ethics. Assume you were in a room with 99 other people chosen at random. If there were a way to measure say, virtue, where do you think you would fall? Don’t answer here; this is just your own, private self-assessment. I’m no psychology buff but I would be surprised if anyone placed themselves in the bottom half, or even below the 75^th percentile.

I’m guilty of this too. Maybe I am in the upper half, but maybe not. I do things wrong, but I’ve noticed a tendency to immediately minimize their importance on the virtue scale or, worse, attribute the action to situational forces rather than my own character. I think this is known as the “halo effect” in psychology parlance. It is very easy to see this in others, but very hard to notice in yourself. An example of this might be when I speed and I tell myself that the speed limit is too low here or I’m really in a hurry. Neither excuse justifies speeding but without them, I might have to admit that I am a law-breaker, which is incongruous with my self-appointed “good person” status.)

So why is this important? Well, for one, if I’m really a 27 on a “good” trait like honesty or punctuality, and I delude myself into thinking I’m a 91, and I think top 10% is good enough, how will I ever improve? In terms of morality, this psychological tendency combined with the widely-held Judeo-Christian belief of heaven and hell can be damning. As long as you are better than average, you're OK.  Think about it. Does anyone consider themselves to be below average in morality? Anyone? Even killers have justifications, situational forces, etc.

I do not believe that exaltation is graded on a curve, and I know that our lives won’t be self-corrected. I’m not saying that my life and choices and personality are secretly evil, I’m only warning against assuming there are worse people out there, which somehow justifies any measure of vice that may be present in ourselves.