Friends, Romans Earthlings, Countrymen Planetmen, lend me your ears:
Homo Economicus is dead. We have lost him a few days ago, but we have missed him for a long time. We have missed his rational actions, his rational voice in our daily actions.
Homo Economicus was the man whom, when given a set of information, would make the most rational and economic decisions. He was the man, who would strife to incur the least costs to gain maximum benefits. He was the man who would try to balance out the information asymmetry faced, by looking for more information. He was the man that could be depended upon when making decisions for himself.
When irrational panic sets in, Homo Economicus was killed. Murdered. Gone is the logical and rational markets. In its place, a pessimistic view hovers over the people’s mind.
When asked on the state of the economy, regular Malaysians would sour up their faces and say something like “DIE DIE DIE!!! Economy is sooooooo terrible“. What do you think these people would do if they held shares in the stock market? And mind you, many people DO hold shares in the stock market.
When asked on the state of the economy, the administration, the government will plaster on their faces a big fake smile, shaking your hands warmly and firmly and tell you that the economy is doing extremely well (See? We’ve reached a record high in the stock market – proves to you that the economy is booming, so says the PM)
3 days ago, when the Shanghai stock exchange underwent a meltdown (8% drop in the composite index), panic sets in. A chain reaction followed around the world. Andrew Leonard called it a long day for the global economy. Local Malaysian doomsayers crouched under their tables and assumed a fetal position, crying.
And thus, Homo Economicus was brutally murdered. The best part, the irony of the murder of Homo Economicus is this – rumors of capital control by the Chinese government (one of the major cause of panics) remains a rumor.
Yes, surely the instinct to flight is there. Homo Economicus decided to cut losses when the rumor surfaced (plus Alan Greenspan’s speech on Monday). But that is not what it is about. Homo Economicus was killed not because of the decisions it makes, but by the sheer irrational panic that surfaced from its decisions.
Doomsday Prophets in Malaysia were predicting another 1997 – a repeat of the Asian Financial Crisis. Irrational panic much? Through the power of blogs and the internet, the panic became a herd panic. Gone is the man who would strive for as much information as possible to balance the information asymmetry. Instead, the man would now subscribe to Conventional Wisdom – that the Economy is BAD! Or he could have subscribed to the Government’s Wisdom – that the Economy is GOOD!
All the while, the Malaysian economy has been pretty much stable (not a boom, nor a recession, what more a stagflation), thanks to Homo Economicus. Sure, there had been some inner whisperings plotting to kill Homo Economicus. Phobos Insensatum is the sole suspect. Irrational panic is the death of the Rational Economical Man. Meanwhile.. around the world,
The Chinese are holding on to the stock market, out of sheer optimism, while everyone else is panic selling. Much faith they have in their government’s plans. Is this rational?
Chinese (or rather, East Asian) economies are much different than western economies. To them, markets are NOT everything. Homo Economicus, the anthromorphic personification of the individual-centered market, has only a very partial presence there. But that is not to say he is totally powerless. Humans still act in a very selfish way, but Asians on the general, act less selfishly, but more for the good of the society. Blame it on 5000 years of being brought up on a staple diet of Confucianism and Buddhism.
Is panic selling rational? The Homo Economicus in one large foreign investor, had decided that if the rumor of the Chinese capital control is true, he has much to lose, so he decides to cut losses. But when a herd mentality ensues, panic selling follows. And gone is the logical person. Dead is Homo Economicus. Instead, if they had acted like the aforementioned Chinese stocktraders gamblers, the meltdown as they call it wouldn’t be so bad. The markets are a reflection on human emotion – so we might well join the panic, and contribute to Homo Economicus’ death.
Ladies and gentlemen, today, we mourn the death of the logical, economical man. Let us hold a moment’s silence in his passing.
Now, death has done all that death can do. And as Homo Economicus goes his way, we are left with the joyful hope he shared. And we look to that fine day when we will see him again, all weariness gone, clear of mind, strong and sure, and smiling again, and the sorrow of his parting gone forever.
Disclaimers and Notes and Comments
Notes:
Disclaimers: I do not claim to be an expert on markets, or economics. This piece is largely my opinions on what is happening and I do not have any statistical data of any sorts up for analysis. These opinions are based solely on my personal observations and through my readings. I do not guarantee that my opinion is correct, but I do guarantee that the information contained in this article is accurate as at the time of publishing. However if in my haste in typing, I made an error, please feel free to contact me or leave a comment here and point out the error
Comments: There are many many many great financial opinions out there, most of them far more qualified than I am, but if it were me, I wouldn’t buy any stocks in the near future (1-2 days). It may be a good opportunity to enter the market later, but not in the near future. I’m no financial con-sultant, so, please don’t take my advice. Go see a qualified Investment Con-sultant. It must be noted that even after the correction, the KLSE Composite Index is still higher than a similar time last year (i.e march 2006)
I shall use Lvl 4 resurrection on Homo Economicus!
^ viva le resistance!
How about replacing it with homo erectus?
Nyek nyek nyek.
Unknow Warrior: Homo erectus is a real species of the Homo genus. It’s extinct, and is one of human kind’s predecessors. Not that you believe in evolution anyways.
Asendure and Aoshi: Huh?
Reading back on what I wrote merely hours ago.. I feel like I am ranting about the senselessness of it all… but my dad maybe correct – I do not have money in the market. Maybe I will feel the same if I do have a large amount of money in it. Anyone wants to donate?
What do you think about Homo Sororitas Fornicatus Infernus, or horny raging lesbians?
Why must you suck the fun out of life? *glares*
LOL at aoshi_88!
(Chewxy, he’s referring to DOTA. =D)
Will give more constructive comments when i’ve read the whole thing. Until then, here’s a comment to feed your insatiable appetite for em’.
~hashie
LoL, Hangmen’s the winrar!
Melodramatic, but great stuff. Anyway the way I see it, it’s just a Malaysian thing isn’t it? Griping even if things are going up and up (not that things are going up now, but…) Complaining, whining, yelling, like the Brits, really, but with more profanity and knee-jerk action.
Hey, we can make a Malaysian action figure there! Now with knee jerk action!
@hashie>> I’m REFERRING to Ragnarok Online.. Resurrection Lvl 4. Only casted by Priestesses and Priests or with a Yggdrassil Leaf.
WRONG’D!
I sense a movie coming along btw.
Whoa… much to reply to, I have
…
Hangmen: the heck?????? Though I wouldn’t mind watching them
Princess: Do I? I thought I was putting more fun into life… but of course I can’t do it like this guy… hehehe
Hashie: Right… Read Aoshi’s later reply. At least I have company in being wrong. LOL.
Unknown Warrior: Go back to your Girls Gone Wild videos.
Empyreal: Agreed. A toy could be made! A definite good idea
Aoshi: I still have no idea …
Anyone knows how the comments got so off topic’d?
Anyways, if you have watched this video (by Yoram Bauman), people are stupid. LOL
Alamak! Malu pulak
It’s strange why no one commented on the errors I made… geez… Shanghai’s stock exchange fell 9%, not 8%. And I’m sure I made some errorneous assumptions along the way too..
you’re the only economist in here, who in the blazing mind would have noticed that mistake?
Er… anyone who’s read the newspaper?
What newspaper?
right. You aussies don’t read newspaper.