the official site of Michael Shermer

How would the average investor know that
Bernie Madoff was running a Ponzi scheme?

Here’s a supreme irony for you. About six months ago a colleague of mine named Stephen Greenspan, a psychiatry professor at the University of Colorado, sent me a book manuscript to review and blurb for him (a blurb is one of those back jacket endorsements from someone who hopefully knows something about the subject of the book). Greenspan’s book is called Annals of Gullibility (Praeger, 2009, due out in January), and it includes chapters on gullibility in literature and folktales (Pinocchio, Gulliver), in religion (end-of-the-world predictions), in war and politics (the Trojan Horse), in criminal justice (child witnesses), in science (cold fusion), and in finance (Ponzi schemes). It’s a great read and an excellent reference source that, as I wrote in my blurb, “belongs on the bookshelves of skeptics and scientists, not to mention politicians and policy analysts, especially before they go to war.”

The remake of The Day the Earth Stood Still delivers a modern warning wrapped in an ancient myth

Klaatu is back and he’s badder than before, with Gort the robot four times the size of the original and a new message for humans to straighten up and save the environment … or else.

The remake of The Day the Earth Stood Still closely parallels Robert Wise’s 1951 science fiction film classic that was a Cold War warning shrouded in a Christ allegory. In the original screenplay by Edmund H. North, an alien ambassador named Klaatu (Michael Rennie) arrives in Washington D.C. in his flying saucer-shaped spaceship (following the UFO convention of the time) with an eight-foot humanoid robot named Gort (played by the 7-foot, 7-inch Lock Martin, who was working as a doorman at Grauman’s Chinese Theater in Hollywood at the time). (continue reading...)

With the market meltdown of the past year those of us who are long-time supporters of the freedom of markets have by now heard the refrain: “What do you say now?” or “So much for your mighty market economics” and especially “See, deregulation doesn’t work.”

Let’s dispense with the “deregulation” myth right here. The list of new regulations called the Federal Register averaged 72,844 pages during the Carter administration, 54,335 pages during Reagan’s presidency, climbed to 59,527 pages for Bush the First, escalated during the Clinton years to 71,590 pages, and set an all-time record during Bush the Second at 75,526 pages, supposedly the era of deregulated markets run amok. So much for the Republicans as the party of government nonintervention. (continue reading...)

As the stock and real estate markets rock and roll our economy and disrupt our investment futures, it is time to disengage our emotional brains and step back for a moment to allow our rational brains to catch up and decide what really is the right way to respond to the turbulence of today’s market disruptions.

In The Mind of the Market I integrate hundreds of findings from the new science of behavioral economics to demonstrate how we all make money mistakes. Armed with this knowledge the hope is that we can avoid such errors in financial judgment. Here are the top ten money mistakes that we all make and how to avoid them. (continue reading...)

Noun. The tendency to find meaningful patterns in meaningless noise

Why do people see faces in nature, interpret window stains as human figures, hear voices in random sounds generated by electronic devices or find conspiracies in the daily news? A proximate cause is the priming effect, in which our brain and senses are prepared to interpret stimuli according to an expected model. UFOlogists see a face on Mars. Religionists see the Virgin Mary on the side of a building. Paranormalists hear dead people speaking to them through a radio receiver. Conspiracy theorists think 9/11 was an inside job by the Bush administration. Is there a deeper ultimate cause for why people believe such weird things? There is. I call it “patternicity,” or the tendency to find meaningful patterns in meaningless noise. (continue reading…)