Canute Thompson's article 'Investment schemes and fundamentalist thinking' (February 22) in this newspaper was certainly thought-provoking. He observed that "A good many of the investors in Olint (like many other such former clubs) were church people, many of whom classified as fundamentalist."

On the basis of that observation he then proceeded to argue that fundamentalism facilitates a mode of thinking that is "characterised by an uncritical acceptance of the presumed wisdom of some elevated other", and this make them particularly vulnerable to excessive risk-taking. The answer he suggests is a good dose of critical thinking.

It is interesting to note that while Thompson's advocacy for more critical thinking in the education system might be good for the society, his argument was not consistent with the rules of critical thinking.

In the first place, the notion that fundamentalist church members were greater victims in the fallout of the alternative schemes is entirely speculative. No data was presented to support the premise and the backing is weak. What was completely ignored is a sea of silent evidence - "What proportion of the investors were fundamentalists in relation to those who were not?" "What share of the victims received a university education?" "How many of the risk-takers were ever exposed to critical thinking?" It is possible that if this data were available the evidence might very well suggest that fundamentalists were no more victims than other members of the society.

Rationality

A central assumption of economics is that human beings are essentially rational and, as such, will take decisions that will maximise their long-term satisfaction. For sure, many investors went to extremes - selling the roof over their heads, taking out huge loans and in some cases trading their souls with the devil to get the money to invest. However, in many cases this kind of behaviour does not accord with rationality.

For Herbert Simons, Nobel Prize laureate, in making economic decisions people have less information that what is desirable; they lack the capacity to see into the future and are often incapable or unwilling to the maths. Consequently, emotions, more often than what classical economics would suggest, guide judgment which, as in the case of alternate investment scheme, can be catastrophic. This is not something unique to fundamentalist thinking - 'bounded rationality' is a virus that afflicts all mortals.

While for a long time moral philosophers and theologians have tried to explain this tragic flaw, in recent times some interesting answers to economic behaviour have emerged from evolutionary biology. The first is that human beings tend reflect a 'herd mentality'. Following what others do in the pack has in the past saved our ancestors from danger and pointed the way to food. So when the herd runs in one direction, the failure to follow invites the risk of being eaten by a predator or going to be bed without supper. The 'herd mentality' which has long been a basis for survival, is therefore instinctive. In the context of sophisticated financial markets and shady alternative investment the primordial impulse to follow the crowd is still powerful.

Fundamentalist thinking

In fact, if more church people actually invest in these schemes it may be argued that it is not primarily an issue of fundamentalist thinking. But rather, that the 'assembly of the brethren' create the condition in which herd instincts flourish. Therefore, depending on the message telegraphed, throngs of unsuspecting believers may rush like galloping buffaloes into these schemes.

A question that might be asked is why, even when there were signs that things are not quite right, the individual investor is often reluctant to get out of these schemes. Evolutionary biologists would put this down as the 'endowment effect'. There is the inclination for people to attach a higher value to the things they possess (or endowed with) than others that they do not own, even though they are no less worthy.

This tendency can be traced back to our ancestors who were reluctant to trade goods they knew for objects they were not familiar with. Life was tenuous then; giving up the known for the unknown could adversely affect food and mating, therefore jeopardising survival. There is a pattern of stubbornness when it comes to investments - many individuals will hang on against their better judgment, hoping for the best. They will make excuses and identify scapegoats even when it is clear that they are irrational. And in the end they only move when the herd begins to rush in the opposite direction.

Irrationality is essentially not a consequence of a certain type of religion or fundamentalist thinking but the outcome of biology.

Finally, will the teaching of critical thinking make people more rational? It should, but there is no guarantee. Some seven decades ago educated Germans fell under the spell of Hitler; and not too long ago learned men were known to have devoted themselves to the Ku Klux Klan. Indeed, more literacy does not necessarily translate to less gullibility and material progress does not ensure civilised behaviour. Yet, for what it is worth, an education in critical thinking might still be humanity's best bet.

Cedric Wilson is an economist who specialises in market regulations. He may be contacted at conoswil@hotmail.com or columns@gleanerjm.com.