Credit Writedowns Sun 2010-05-16 14:53 EDT

Spinoza, Descartes and suspension of disbelief in the ivory tower of economics

...The core of my argument will come from James Montier, now at the fund manager GMO. As a strategist at Dresdner Kleinwort Benson in 2005, he wrote a timeless piece on the debate between two 17th century philosophers René Descartes of France and Baruch de Spinoza of the Netherlands. Descartes was of the view that people process information for accuracy before filing it away in memory. Spinoza made the opposite claim, that people must suspend disbelief in order to process information. The two competing ideas were put to the test; and it appears that Spinoza was right about the need for naïve belief, something that has grave implications for investing, the subject of Montier's essay..."Distraction, then, is an especially useful technique when a person's arguments are poor because even though people might be aware that some arguments were presented, they might be unaware that the arguments were not very compelling."...

credit writedowns; Descartes; disbelief; economic; ivory-tower; Spinoza; suspension.