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What Caused the BP Oil Leak? Magical Thinking

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Over the past twenty months the USA has experienced two cataclysmic disasters, the 2008 near meltdown of the financial system and the recent Gulf Coast ecological disaster resulting from a deep-sea oil leak. While both events resulted from failed oversight, they have a deeper genesis: magical thinking.

Magical thinking is best thought of as pre-rational reasoning. The Swiss psychologist Jean Piaget called it preoperational because it does not apply adult rules of logic.

Several types of magical thinking are prevalent in American culture and influence political decisions. The most common is the belief that science can solve all problems. While an ancient belief - in previous generations scientist were sometimes regarded as magicians - it gained wide credence after World War II. Deployment of nuclear reactors was justified by the widespread belief that the terrible problem of spent fuel would eventually be solved by new scientific discoveries. Sixty years later, the problem of nuclear waste persists.

The collapse of the British Petroleum/Deepwater Horizon drilling rig in the Gulf of Mexico illustrates a variety of this form of magical thinking: if they can build it, it must be safe. (This same belief caused New Yorkers to regard the World Trade Center as indestructible.) In fact the drilling rig lacked an operational blowout preventer. Given the frequency of accidents on offshore oilrigs -- in just the Gulf of Mexico, there were 39 incidents in the first five months of 2009 -- reasonable oversight would have insisted on a state-of-the-art fully functional blowout preventer rather than blind faith.

2008's financial disaster was precipitated by another form of magical thinking: the worldwide financial marketplace is self-correcting, the belief that whatever kinds of economic problems occurred the market would fix them without government involvement. (A variation of this belief predicted the market would provide healthcare for all Americans.) For thirty years, the Chicago School of Economics promoted Wall Street deregulation by insisting that markets were inherently self-regulating and, no matter how severe the setback, markets would quickly return to equilibrium. This conservative theory touted "efficiency," "productivity," and "trickle-down equity" as the inevitable byproducts of laissez-faire capitalism. The result was a savage increase in monopoly capitalism, savage inequality, and the loss of eight million jobs.

Blind faith in science and belief the market will solve all our problems derive from a core magical belief: what is good for capitalism is good for America. It's easy to poke holes in this belief - by for example, noting that unbridled capitalism utilizes slave labor and condones obscene pollution - but it has an ironclad grip on the American psyche. (A famous twentieth century bestseller, The Man Nobody Knows portrayed Jesus as the founder of modern business.) Logically, this is an example of the Fallacy of Accident, a generalization that ignores obvious exceptions.

Magical thinking would be of only academic interest if it did not have such a profound affect on public policy. Naïve faith in science and the "self-correcting" marketplace led to deregulation and, ultimately, horrendous disasters. Now America is facing difficult choices about issues such as deficit reduction and energy. Widespread use of magical thinking could preclude wise decisions.

Most Americans are worried about the deficit. But they also want their taxes to be reduced. When asked the best way to both reduce the deficit and cut taxes, they typically answer reduce wasteful government programs. Magical thinking believes this is plausible and uses miniscule examples of ill-conceived Federal programs to support an unwarranted generalization: all government programs are wasteful.

But they're not. Roughly 46 percent of budget goes to military-related spending that most Americans don't want to reduce. Another 39 percent goes to Social Security, Medicare, and Medicaid programs that most Americans support. That leaves approximately 15 percent of expenditures that could theoretically be reduced. But this includes items like the interest on the debt and homeland security, programs that Americans support once they understand the details. As was true in the meltdown of the financial system and the BP oil leak, magical thinking will not allow the US to both reduce the deficit and taxes. The solution to the deficit problem is to raise taxes for corporations and the rich.

Similarly, most Americans are worried about our reliance on foreign oil imports. But so far they haven't been willing to make the difficult choices that will solve the problem. Writing in the January issue of FOREIGN POLICY Ted Nordhaus and Michael Shellenberger note the problem of magical thinking, the widespread belief that "energy efficiency pays for itself, solar and wind power are already nearly cost competitive with fossil fuels, and both can quickly and cheaply reduce emissions." This form of magical thinking makes it easy for us to avoid both fossil-fuel taxes and major investment in new energy technology.

The root cause of the 2008 meltdown of the financial system and the BP oil leak was magical thinking. As America faces difficult choices on deficit reduction and energy policy, shouldn't our elected officials act like rational adults?