Reflections on the Psychology of Psychologists and Economists

I question the psychology and economics of Tom Ferraro and Lily Xu, as well as the economics and psychology of Professor of Economics Robert J. Schiller and the other writers they cite. All leave out too much of the historical, economic, psychological, and social context of their small facts. In regard to the social context, they succumb to the fallacy of specificity.

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Almost from the beginning, Americans have been big spenders but also big earners in order to finance the spending. This was the expression of a highly productive political economy as recognized in Adam Smith’s time. Thus, his Wealth of Nations saw America compared to Britain as “much more thriving, and advancing with much greater rapidity to the further acquisition of riches.” Indeed, people can save too much for their own good, as John Maynard Keynes argued during the Great Depression. He saw savings as reducing consumption and thus leading to low demand for goods and, consequently, the period’s high unemployment. If this was not quite right, his argument shows the error in concentrating too much on one economic item like savings.

The remarks about American narcissism and the hedonism are too impressionistic to support valid reasoning about the American character. The authors cannot deny the American willingness to endure hardship for hopeful ends. Why else has the United States become the greatest economic power of all time?

The poverty of these examples is shown by comparing the true proportions of the American and Chinese economies. The Chinese growth rate is much larger than the American because its base figure is so small; the United States began with huge figures and still improves upon them. In 2001, to set up a suitable proportion, the United States had a gross national product (GNP) of nearly $8 trillion against the Chinese figure of $4.6 trillion (in 1990 international U.S. dollars). The U.S., with a quarter of China’s population, had a per capita income of $28,000 against China’s of $3,583. What does the savings rate mean against these figures of different magnitude?

Having followed China’s history, I expect it to expand on its present achievement. If it can construct an efficiently working democracy (always a question in the case of any leadership elite), it can build upon its numbers and culture to replace the United States as the greatest power in the twenty-first century. But let us wait and see what happens.

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