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Monday, November 30, 2009

How Free-Market Delusions Destroyed the Economy

Corporate Accountability and WorkPlace

How Free-Market Delusions Destroyed the Economy

By Raj Patel, Picador Press

Corporate Accountability and WorkPlace: The worship of free markets set off the economic meltdown.

The following is an excerpt from Raj Patel's new book, The Value of Nothing (Picador, 2010).

The Value of Nothing by Raj Patel (Picador, 2010)

If war is God’s way of teaching Americans geography, recession is His way of teaching everyone a little economics. The great unwinding of the financial sector showed that the smartest mathematical minds on the planet, backed by some of the deepest pockets, had not built a sleek engine of permanent prosperity but a clown car of trades, swaps and double dares that, inevitably, fell to bits. The recession has not come from a deficit of economic knowledge, but from too much of a particular kind, a surfeit of the spirit of capitalism. The dazzle of free markets has blinded us to other ways of seeing the world. As Oscar Wilde wrote over a century ago: "Nowadays people know the price of everything and the value of nothing." Prices have revealed themselves as fickle guides: The 2008 financial collapse came in the same year as crises in food and oil, and yet we seem unable to see or value our world except through the faulty prism of markets.

One thing is clear: The thinking that got us into this mess is unlikely to rescue us. It might come as some consolation to know that even some of the most respected minds have been forced to puzzle over their faulty assumptions. Perhaps the most pained admission of ignorance happened in a crowded room in front of the House Committee on Oversight and Government Reform when, on October 23, 2008, Alan Greenspan described the failure of his worldview.

Greenspan was one of the acknowledged legislators of the world’s economy over the past nineteen years in his role as chairman of the Federal Reserve. A card-carrying member of the free market brigade, he used to sit at the feet of Ayn Rand who, although largely unknown outside the United States, remains influential long after her death in 1982. Her 1957 book Atlas Shrugged, in which heroic business moguls fight the scourge of government officials and union organizers, has once again scaled the bestseller lists. Regarding altruism as “moral cannibalism," Rand was the cheerleader for an extreme free market libertarian school of thought, which she called “Objectivism."

Drawn into her circle by this heady philosophy, Greenspan earned himself the nickname “the Undertaker" for his jolly demeanor and dress sense. When Greenspan chose a career in government, it was rather like a hippie joining the marines, a lapse that his former friends could never forgive. Despite this, Greenspan remained largely faithful to Rand's philosophy, continuing to believe that egoism would lead to the best of all possible worlds, and that any form of restraint would result in disaster.

At the end of 2008, Greenspan was summoned to the U.S. Congress to testify about the financial crisis. His tenure at the Fed had been long and lauded, and Congress wanted to know what had gone wrong. As he began to read his testimony, Greenspan looked exhausted, his skin jowly and sagging, as if the vigor that once kept him taut had all been spent. But he came out swinging. In the first round, he took aim at the information he’d been working with. If only the input had been right, the economic models would have worked, and the predictions would have been better. In his words, a Nobel Prize was awarded for the discovery of the pricing model that underpins much of the advance in derivatives markets. This modern risk management paradigm held sway for decades. The whole intellectual edifice, however, collapsed in the summer of last year because the data inputted into the risk management models generally covered only the past two decades, a period of euphoria.

Had instead the models been fitted more appropriately to historic periods of stress, capital requirements would have been much higher and the financial world would be in far better shape today, in my judgment.

This is a garbage-in-garbage-out argument: The model worked just fine, but the assumptions about risk and data, based only on the good times past, were faulty and so the output was correspondingly wrong. Greenspan’s nemesis on the panel, Henry Waxman, pushed him to a deeper conclusion, in this remarkable exchange:

Waxman: The question I have for you is, you had an ideology, you had a belief that free, competitive -- and this is your statement -- “I do have an ideology. My judgment is that free, competitive markets are by far the unrivalled way to organize economies. We have tried regulation, none meaningfully worked.” That was your quote. You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others. And now our whole economy is paying the price. Do you feel that your ideology pushed you to make decisions that you wish you had not made?

Greenspan: Well, remember, though, what an ideology is. It’s a conceptual framework with [sic] the way people deal with reality. Everyone has one. You have to. To exist, you need an ideology. The question is, whether it is accurate or not. What I am saying to you is, yes, I found the flaw, I don’t know how significant or permanent it is, but I have been very distressed by that fact.

You found a flaw?

I found a flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.

Waxman: In other words, you found that your view of the world, your ideology, was not right, it was not working.

Greenspan: Precisely. That is precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.

The flaw, to be clear, wasn’t a minor one of shoddy data. Nor was it the bigger Black Swan problem that writers like Nassim Taleb discuss, a problem of failing to account for highly unlikely events that, should they happen, involve catastrophic consequences. Greenspan’s flaw was more fundamental still. It warped his view about how the world was organized, about the sociology of the market. And Greenspan is not alone. Larry Summers, the president’s senior economic advisor, has had to come to terms with a similar error -- his view that the market was inherently self-stabilizing has been "dealt a fatal blow." Hank Paulson, Bush’s Treasury Secretary, has shrugged his shoulders with similar resignation. Even Jim Cramer from CNBC’s "Mad Money" admitted defeat: "The only guy who really called this right was Karl Marx." One after the other, the celebrants of the free market are finding themselves, to use the language of the market, corrected.

The extent of Greenspan's admission has passed most of us by. If you trawl the oped pages of the financial press, you'll find plenty of analysis that fits Greenspan's first gambit, with pundits offering stories about how risk was incorrectly priced (which it was), how the lack of regulation allowed the panic to feed back into the financial system (which it has), how the incentive structures rewarded traders who were able to push financial risk far into the future (which they did) and how free market ideologues removed the sorts of circuit-breaking policies that might today have helped (and they did that too). But these are all it-could-have-been-fixed-if-we'd-planned-better responses. I am not sure that we're able to comprehend what Greenspan's admission might really mean for us. It would be too big a shock to have the fundamentals of policy in both government and the economy proved wrong, and to have nothing with which to replace them.

It's as if one day, you were to wake up and find yourself transformed into a cockroach. This is the premise of Franz Kafka's novella Metamorphosis. In the first sentence, a young salesman named Gregor Samsa wakes up, after a night of bad dreams, to find that he has turned into an enormous bug. Gregor Samsa's response is revealing, telling us a little bit more about ourselves than we'd like. For what does Samsa do when he discovers he's a bug? He doesn't scuttle from his room screaming, or ponder how this happened, or what his transformation means, and what he might become tomorrow. His response is essentially this: "Poor me! How am I going to keep my job?" Which is almost exactly how we've reacted to this economic crisis. While no one has yet woken up in the body of a bug, we have all found ourselves in a world turned upside down, where everything we were told was to our advantage has turned out to be its opposite. Greenspan's "flaw" has profound repercussions -- to understand it fully would mean a complete reappraisal of the way we conduct our lives. We would need not only a new way of mooring our expectations of our society and our economy, one based on richer assumptions about human nature, but also a different ideology governing the exchange of goods and services.

Prices do some heavy ideological lifting in Greenspan's world. They provide a way to see and know the collective wants and resources of our small planet. This is Friedrich Hayek's economic philosophy, in which prices are the tendrils through which wants and needs are communicated. Science fiction fans will already be familiar with what this looks like. In "The Matrix," liberated humans (and the programs who hunt them) can see the world in its raw form, as a digital rain of symbols and signs. This is the science fiction that governs economic fact. Data pelting down monitors is what the masters of the universe on the global financial exchanges stare at, their eyes darting from screen to screen, trying to see through the world and profit from it. In "The Matrix," the signs were a simulation of the real world, hiding more than they revealed. The trouble is that this unreliable digital ticker tape has now become a central prop in the drama of modern commerce.

Consider the fate of Volkswagen, which at the end of October 2008 managed briefly to become the world's most valuable corporation without having to sell a single vehicle. With the economy still in free fall, traders on stock market floors were taking a dim view of Volkswagen. They looked at their screens and concluded that, just like every other auto manufacturer, Volkswagen was heading for tough times. Imagine you're a trader who feels in your bones that the stock price can only fall. One way to cash your hunch in is to sell Volkswagen stock today, and buy it back when the price falls. Since you don't walk around with Volkswagen stock falling out of your pockets, you'll turn to someone who does, like an institutional investor. You borrow their stock, for a price, and promise to return all of it very soon. The institutional investor is happy because they make money from lending out the stock, which they will get back in one piece. You're happy because you can sell this stock, wait for the price to fall, buy it back and, with the profit, not only pay back the institutional investor, but make the next installment on your yacht in Monaco. This practice is called "shorting."

The trouble was that Volkswagen's rival, Porsche, had started quietly buying Volkswagen stock, aiming to secure 75 percent of the company. When the scale of Porsche's buying spree came to light, it became rapidly clear that there was little of the company left to trade. With Porsche sucking up all the shares, the price for Volkswagen didn't drop. Traders were selling borrowed stock to Porsche, and when Porsche announced its intentions to hold the stock, traders panicked. This led to a "short squeeze," a flocking of investors looking to cover the ill-conceived bets that they'd paid for with stock that they didn't own. They'd wagered that Volkswagen's price, like that of any other car company in a recession, would fall. When it became clear that even if Volkswagen wasn't doing well in the car market, its share price was nonetheless defying gravity, the speculators rushed to buy before the price went any higher.

Their combined purchases drove the price of shares up further. So high did the price rise that Volkswagen entered the DAX 30 index of the largest corporations on the German bourse. This triggered another buying spree, driven not by stock market gamblers, but by their polar opposites -- conservative institutional investors. Pension funds, for instance, invest with an eye to long-term returns; they prefer a slow and certain accumulation of wealth rather than risky bets. One way that they keep their portfolio on an even keel is to buy shares in nothing but blue chip corporations, ones that are guaranteed to be least susceptible to the shocks that stocks are heir to, ones that are in the top, say, thirty corporations traded in the open market. When Volkswagen joined the ranks of the DAX 30, a flock of institutional investors automatically wanted in. So they bought Volkswagen shares at what ever price they could find them. The result? The price per share went from 200 to 1,000 in a week--an increase in company value of 300 billion (244 billion; $386 billion). It made Volkswagen, briefly, bigger than ExxonMobil (with a book value of a mere $343 billion). And for this, the company didn't raise a finger.

In the end, the rules on the DAX were changed, the price settled down and, in 2009, Volkswagen bought Porsche. It is easy enough to tell this story as one where institutional investors got caught with their pants down, where there was imperfect information about the size of the market, where the rules of different short-run and long-run games tangled. But look more closely. Underwriting this version of the story is a conceptual structure that lies beneath every story of excess and crash. The very notion of a bubble relies on the premise that when the bubble pops, things return to a normal state, a situation of price reflecting value more accurately. This is the story told after every boom and bust, from the South Sea Bubble of 1720 to the housing catastrophe of 2008. There's a widely shared opinion that normality will ultimately return to the world economy--but it's a consensus view that rests on a story where bubbles are exceptions to the standard (and successful) procedures of market valuation. If those procedures themselves were flawed, as Greenspan suggests, then our faith in a gentle return to earth is misplaced, for there is and never has been any solid ground beneath our feet.

There is a discrepancy between the price of something and its value, one that economists cannot fix, because it's a problem inherent to the very idea of profit-driven prices. This gap is something about which we've got an uneasy and uncomfortable intuition. The uncertainty about prices is what makes the MasterCard ads amusing. You know how it goes -- green fees: $240; lessons: $50; golf club: $110; having fun: priceless. The deeper joke, though, is this: The price of something doesn't measure its value at all. This prickly intuition has become entertainment. An alien from another planet would find it strange that one of the most popular TV shows in dozens of countries is one that trades on the confusion around what something's worth: "The Price Is Right." In the show, the audience is presented with various consumer durables, and asked to guess the retail price of each. Crucially, you don't win by correctly guessing how useful something is or how much it costs to make -- prices are poor guides to use and true costs of production. You win by developing an intuitive sense of what corporations believe you're willing to pay.

In the world of fund management, the systematic confusion surrounding what something is worth has made some people very rich. Traders' salaries are linked to the returns above expected rates for the risk they take on, the so-called alpha that they contribute to the returns. Think of a bet on a coin flip, with odds of two to one. I bet $1 that I will hit heads, and every time I do, I get $2. In the long run, I'd expect a dollar bet with those odds to return a dollar because I'll come up heads about half the time. But if I'm returning $1.50 on the bet, I'm making magic happen. This magic gets turned back into coins that I get to keep, through bonuses and increased salary. This is a tough trick to pull off because there are only a handful of ways to create added value in fund management -- I can pick undervalued stocks that outperform expectations, I can nurture innovations that change the rules of the game, or I can create new bespoke assets that institutional investors might like.

So we would expect alpha to be rare, and it is, but driven by the desire to cash in, there were many who created fake alpha through bets that appeared to produce consistently good returns despite having a small built-in chance of catastrophic loss. If the expected value of this loss were factored in, the alpha would disappear. But the risks were ignored and bonuses flowed. The frat boys who ran the economy, and profited from its poor regulation, made billions. They were paid today for outcomes that they predicted would happen in the future, using a "mark to model" accounting practice that essentially allowed them to book today what they projected they'd earn tomorrow. This practice was justified on the grounds that "markets know best."

That markets should know best is a relatively recent article of faith, and it took a great deal of ideological and political work to make it part of governments' conventional wisdom. The idea that markets are smart found its apotheosis in the Efficient Markets Hypothesis, an idea first formulated by Eugene Fama, a Ph.D. student in the University of Chicago Business School in the 1960s. In the ideological foundations it provided for financiers, it was a mighty force -- think of it as Atlas Shrugged, but with more equations.

The hypothesis states that the price of a financial asset reflects everything that a market knows about its current and future prospects. This is different from saying that the price actually does reflect its future performance -- rather, the price reflects the current state of beliefs about the odds of that performance being good or bad. The price involves a bet. As we now know, the market's eye for odds is dangerously myopic, but the hypothesis explains why economists find the following joke funny:

Q: How many Chicago School economists does it take to change a lightbulb?

A: None. If the lightbulb needed changing, the market would have already done it.

The problem with the Efficient Markets Hypothesis is that it doesn't work. If it were true, then there'd be no incentive to invest in research because the market would, by magic, have beaten you to it. Economists Sanford Grossman and Joseph Stiglitz demonstrated this in 1980, and hundreds of subsequent studies have pointed out quite how unrealistic the hypothesis is, some of the most influential of which were written by Eugene Fama himself. Markets can behave irrationally -- investors can herd behind a stock, pushing its value up in ways entirely unrelated to the stock being traded. Despite ample economic evidence to suggest it was false, the idea of efficient markets ran riot through governments. Alan Greenspan was not the only person to find the hypothesis a convenient untruth.

By pushing regulators to behave as if the hypothesis were true, traders could make their titanic bets. For a while, the money rolled in. In the mid-1990s, the Financial Times felt able to launch a monthly supplement, titled "How to Spend It," to help its more affluent readers unburden themselves. The magic of the past decade's boom also touched the middle class, who were sucked into the bubble through houses that were turned from places of shelter into financial assets, and into grist for the mill of the financial sector. But ordinary homeowners couldn't muster the clout that banks could: Governments enabled the finance sector's binge by promising to be there to pick up the pieces, and they were as good as their word. When the financiers' bets broke the system, the profit that they made from these bad bets remained untouchable: The profit was privatized, but the risk was socialized. Their riches have cost the whole world dear, and yet in 2009 the top hedge fund managers have had their third best year on record. George Soros is, in his own words, "having a very good crisis," and staff at Goldman Sachs can look forward to the largest bonus payouts in the firm's 140-year history.

What this suggests is that the rhetoric of "free markets" camouflages activities that aren't about markets at all. Goldman Sachs employees are doing well because their firm turned some distinctly nonmarket tricks. Rolling Stone journalist Matt Taibbi has recently revealed, with characteristic verve, how Goldman Sachs has bought the U.S. government. In the Obama administration's economic team, Wall Street has a generation of finance-friendly appointees, from Treasury Secretary Tim Geithner, who arranged a historic $29 billion loan to persuade JPMorgan Chase to acquire Bear Stearns during his tenure as chair of the Federal Reserve Bank of New York; to Larry Summers, who earned $5.2 million by working one day a week for a couple of years in a large Wall Street hedge fund. Their new positions in the White House make them the Tarzans of the economic jungle. Wall Street has reason to be pleased. Goldman had invested heavily in AIG, the insurance giant whose financial products division had brought the 90-year-old giant to bankruptcy. With the 2008 AIG rescue, the $13 billion that Goldman invested was repaid at full face value. Investors in Chrysler, by contrast, stand to get 29 cents for every dollar they invested.

Anyone concerned with democracy should be worried that the seam between Wall Street and the government is almost invisible. At the very least, it raises serious reasons to doubt that the institutions that facilitated the crisis can clean up their mess. Nassim Taleb points to the absurdity here: "People who were driving a school bus (blindfolded) and crashed it should never be given a new bus." The problem is that because both our economy and to a larger extent our politicians aren't really subject to democratic control, the bus drivers are always going to be graduates of the same driving school.

Despite the ongoing hijack of government by Wall Street, a word that hasn't been heard in over a generation is being uttered by politicians: "regulation." It's true that Goldman Sachs and others are profiting handsomely from the collapse, but there is nonetheless a growing sense among politicians that the market may have been allowed too free a rein. Naomi Klein's devastating critique The Shock Doctrine demonstrates how disasters were turned into platforms for rabidly free market policies, and it's an analysis that explains the post-World War II era and today's ongoing financial plunder, from California to Wall Street to the City of London, very well. But there is a recognition among the public and some politicians that today's economic crisis is a failure of free market thinking, and not a warrant for more. In response to popular outcry, politicians around the world seem ready to discuss how to regulate and restrain the market. The question is, can they, and, if they can, in whose interests will this regulation work?

From its inception, the free market has spawned discontent, but rare are the moments when that discontent coalesces across society, when a sufficiently large group of people can trace their unhappiness to free market politics, and demand change. The New Deal in the United States and the postwar European welfare states were partly a result of a consortium of social forces pushing for new limits to markets, and a renegotiation of the relationship between individuals and society. What's new about this crisis is that it's pervasively global, and comes at the last moment at which we might prevent a global climate catastrophe.

Excerpted with publisher's permission from "The Value of Nothing" (Picador, 2010) by Raj Patel.

Conservatives Can Really Be Heartless Bastards

Conservatives Can Really Be Heartless Bastards

Posted by Joshua Holland, AlterNet at 1:10 PM on November 29, 2009.

Stunning that someone could be this obtuse.

The U.S. economy has shed 7.3 million jobs in the past 23 months, the biggest hit to the labor market since the Second World War. (Just to keep up with the growth in the working population would have required the addition of around 3.5 million jobs during that time.)

Unemployment has more than doubled in the past two years, and is now over 10 percent. The dispiriting number rises to more than 1 in 6 -- 17.2 percent of working Americans -- when you include those underemployed against their will (working part-time, free-lancing, etc.).

And American households have lost $14 trillion in wealth in the real estate and stock markets since the crash.

Against that backdrop of very real pain, I want you to consider what kind of person would sit down, as John J. Miller did for the National Review, and write something like this about food-stamps, which are currently helping feed 1 out of every 4 American children [ht Tintin]:

Seems like there ought to be a stigma attached to the use of welfare. A little bit of shame can go a long way toward encouraging people to find jobs. The federal government may think it's doing people a favor by providing them with access to food, but it's doing them a disservice if it also robs them of the motivation necessary to break free from dependency.

Yes, an empty belly is just the incentive people need to get up off their lazy asses and go out to find one of those nonexistent jobs.

Allow me to point out that John J. Miller lives off the hand-outs of hard-right cranks and wealthy ideologues. He writes for The National Review, which has never turned a profit (founder William F Buckley once said that NR had lost over $25 million dollars over the years). Miller's latest book was a paean to a big-money right-wing foundation, published by another big-money right-wing foundation.

Perhaps if there were a bit of stigma attached to being a clown who earns his keep off of wingnut welfare, it would discourage Miller from being so dependent on the generosity of others. Parasite.

If Miller's name rings a bell -- he's a C-list right-winger --it's most likely the result of a much-mocked book arguing that we should regard France as our mortal enemy which he co-authored after the invasion of Iraq. It prompted a review in Foreign Affairs that began: "That a book as shoddy and biased as this one should be published by a reputable press is eminently regrettable."

You can buy a copy on Amazon right now for a penny, if you don't need it for food.

Sunday, November 29, 2009

Should Health Be Available Only to Those with Status in Society?

Social Status Has Measurable Effect on Health

by Rick Wilson

In recent years, a growing body of scientific research indicates that human health and longevity aren't just matters of genes and habits. Rather, they seem to have a lot to do with our relative status or position in society.

The wonky term for this kind of thing is "the social determinants of health," which was recently the topic of a presentation to the West Virginia Legislature by epidemiologist and physician Dr. Camara Jones of the U.S. Centers for Disease Control. While the focus of Dr. Jones' presentation was on racial disparities, she said that inequalities and inequities affect the health of all people, regardless of racial or ethnic backgrounds.

A pioneer in this field of research is the British epidemiologist Michael Marmot, who among other things studied English civil servants over a period of decades. Here's the short version of his findings: people higher up the ladder lived longer and were less sick than those lower down, even when we take individual behavior into account.

This was true despite the fact that England has universal health care. Without it, the differences would no doubt have been even worse.

Most of us probably wouldn't be surprised to learn that poor people have shorter and sicker lives than those who are better off, but Marmot found the effect or "social gradient" to be constant throughout the hierarchy. That is, people just below the highest levels tended to have shorter lives and be sicker than those just above them and so on all the way down. Marmot's findings about the social gradient occur among other groups as well.

One interesting study even found that actors who win Academy Awards lived an average four years longer than those who were nominated but didn't win. No wonder they always thank the Academy ...

Part of what seems to be going on is that as social animals, we measure our own well being in terms of those around us. In Marmot's book The Status Syndrome: How Social Standing Affects Our Health and Longevity, he finds two variables that seem to have a great impact on our health and well being: a sense of autonomy or control over one's life and work, and the ability to fully participate in the society in which we live.

In our society, people with higher incomes and education levels tend to have more control and be less subject to shocks and setbacks than those with fewer resources. A car that breaks down, for example, is no big deal if you can afford to fix it and rent another, but it can trigger a disastrous chain of events for low-wage workers. Ditto a family illness, job loss or any of the "thousand natural shocks the flesh is heir to," as Hamlet put it.

People with more resources are also more able to fully participate in social activities. For the less fortunate, it's often a struggle to provide decent clothing for school-aged children, let alone pay for extracurricular activities that others take for granted.

It seems that jobs and situations that give people low levels of control and impose high demands and low rewards are particularly toxic for health. Outside of the workplace, such situations might include living in bad housing or in unsafe or toxic neighborhoods or in violent family situations.

These kinds of situations seem to activate the body's stress response, which was designed to deal with short-term threats and dangers but can lead to higher risks of various kinds of diseases when the stress is prolonged or chronic. This can lead to a great susceptibility to such illnesses as diabetes and heart disease as well as greater risk of infectious disease.

A startling finding of this kind of research is that relative deprivation in early life can have lasting impacts on health years later. In one experiment, healthy adults were exposed to two kinds of rhinoviruses, which cause common colds. They were asked a series of questions about their socio-economic status. It turned out that people whose parents owned their homes when they were children were significantly less likely to get sick than those whose parents didn't.

The findings of Marmot and other researchers is pretty sobering in the context of the current recession. Based on solid research, it's sadly safe to say that some people are going to die sooner than they otherwise would have because of it. Marmot's research on jobless workers in Britain found that "people who became unemployed had 20 percent higher mortality than those who remained employed at the same social class level."

He argues that this is because there are two aspects to economic hardships and loss of material resources. The first is "a lack of basic material conditions for life," or what social scientists call absolute poverty. The second is "insufficient resources, private or public, to participate in society," or what is called relative poverty, which has more of an impact than previously imagined. Obviously loss of income is a major blow, but even if an unemployed person has some resources or savings to fall back on, such people still "have worse health than those still employed in the same occupational social class."

Add to the mix the other key factor: being involuntarily unemployed also reduces one's sense of autonomy and control over one's life. Taken together, loss of control and inability to fully participate in society are a recipe for trouble.

That's why policies that create or save jobs or provide basic supports in hard times are particularly important. As a report by the World Health Organization on the social determinants of health put it, "Social justice is a matter of life and death."

Wilson is director of the American Friends Service Committee WV Economic Justice Project and publishes a daily blog, goatrope.blogspot.com.

Don’t Let Obama’s EPA Silence Critics

Don’t Let Obama’s EPA Silence Critics

by Louis Clark

In late October, lawyers Allan Zabel and Laurie Williams exercised their First Amendment right of free speech when they posted a YouTube video criticizing the proposed cap-and-trade emissions program. But the Environmental Protection Agency, which has employed both Zabel and Williams for 20 years, ordered them to take it down and remove from it mention of their work experience.

Zabel and Williams made it quite clear that their views were their own, and did not represent the views of the agency. In mentioning their work experience, they were doing no more than establishing their identities, which is the right of all citizens to do. The EPA's shocking reaction continues the legacy of notorious Bush-era policies that ruthlessly tried to limit free speech for government workers -- especially those having to do with climate change dangers.

In 2005 the Bush administration attempted to muzzle the world's most famous climate scientist, Jim Hansen. As a top scientist at NASA, he publicly commented on data which convinced him that 2005 was one of the hottest years on record. At a climate science conference he also observed, "In my more than three decades in the government, I have never seen anything approaching the degree to which information flow from scientists to the public has been screened and controlled as it is now."

As Hansen accurately observed and courageously protested, the public affairs offices at certain environmental science-oriented government agencies were imposing strict rules on employees. These included requiring that all press inquiries be referred to public affairs offices, which would then determine which staff could "most appropriately" answer the inquiries. The public affairs offices went so far as to demand that any scientist who did submit to interviews must allow public affairs officials to sit in during taping.

Later, a 24-year-old NASA public affairs employee, whose only qualification for his position was that he had volunteered for the 2004 Bush re-election campaign, ordered Hansen to shut up and follow the rules or suffer "dire consequences." However, the scientist refused to remain silent about the dire consequences of climate change. When the official was found to have lied about having a college degree, the absurdity of such an under-qualified neophyte ordering a world-famous public servant to suppress his views became obvious even to the Bush administration. NASA quickly backed down, largely reworking its policy and forcing the public affairs employee to resign.

At the same time, the EPA, which had established a similar gag on its employees, refused to reconsider its policy, and it still stands today -- despite the rhetoric of a memo from its top administrator indicating a new day had arrived at the agency.

A few days ago, EPA managers apparently relied on this Bush-era public affairs relic to force Zabel and Williams to withdraw their video. Simply put, by accepting government employment, federal employees should not be forced to give up their First Amendment freedoms, their rights under whistle-blower protection laws, their freedom to communicate with Congress, or their rights under anti-gag legislation that protects them from government officials who abuse their authority. On all four counts, the EPA actions against the San Francisco attorneys violate the law.

Obviously, even if the EPA did not learn anything from the Hansen public affairs fiasco at NASA, the election of President Barack Obama and his several pronouncements on freedom of speech for scientists and other federal employees should have brought a "teaching moment" to whomever decided to silence Zabel and Williams. Now in the clear light of a sunnier day, cool heads will surely prevail. We should all hope that the previous administration's efforts to suppress contrary opinion on climate change will finally give way to a new dawn of transparency and genuine professional freedom of speech.

Louis Clark is the President of the Government Accountability Project, the nation's leading whistle-blower protection organization.

The Poorest Immigrants Subsidize Healthcare for Everyone Else

The Poorest Immigrants Subsidize Healthcare for Everyone Else

by EunSook Lee

Would it be acceptable if we were to make medical care out of reach for any segment of our nation’s population? For the 15.5 million Asian Americans, Native Hawaiians, and Pacific Islanders? Or for the 44.3 million Latinos? Let’s hope not. But, as it stands, our growing acceptance is paving the road for health reform proposals that categorically exclude our nation’s immigrant population. We forget that when people like Lou Dobbs or Rep. Joe Wilson are enraged about “immigrants” they are talking largely about communities of color. Americans know it is wrong to discriminate based on immutable characteristics such as sex or race—but convincing them to protect the act of being an immigrant remains a challenge that cuts across social justice issues such as health reform.

The days are nearing when we may see the passage of major health reform legislation. We know that there are significant differences between the House and Senate bills on how immigrants are treated -- for example, in the House bill, undocumented immigrants are able to purchase health insurance with their own money in the exchange while they will be excluded from doing so in the Senate. There are also common problems with both bills: the continued ban on federal funding for legal immigrants in Medicaid who have had their status for less than five years.

Currently, legal immigrants, who work and pay taxes that contribute to our health care system will continue to be ineligible to receive federally-funded Medicaid services for five years. In this case, we are not talking about those who make at least 133 percent of federal poverty level and could access affordability credits like everyone else for purchasing insurance in the exchange. We are talking about immigrants with the lowest incomes. It is unreasonable and saddening that under the current health reform proposals, the people who really need it will not get it.

This August we saw indignant crowds who largely had health insurance opposing the ability for more Americans to be insured. The indignation should also be coming from immigrant communities. And it is rising now. In the last two weeks, more than 6,000 people from Washington State to Washington, D.C. signed petitions demanding that immigrants be treated fairly by repealing the five year waiting period and enabling undocumented immigrants to purchase insurance.

On Monday, November 23, hundreds of people in California and Washington, D.C. stood up for immigrants in health reform in two distinct actions to highlight the best and the worst that there is in the national debate concerning how we as Americans treat immigrants. The rally and vigil outside of Speaker Pelosi’s office, and the confrontation with Rep. Joe Wilson’s staff are actions that drew not only longtime health advocates, but also people who realized that this complicated health care issue is intimately about them and could result in the exclusion of their friends, families, and colleagues.

Communities across America are waking up to this realization and Congress needs to take notice. In San Francisco, a group of Chinese American tenants gathered over 1,000 signatures in just two days, for example. A strong and diverse coalition of local and national community organizations from health advocates to immigrant rights organizations to Asian American and Pacific Islander community groups came together, because the call for equity in health reform needs to be louder.
EunSook Lee is the Executive Director of the National Korean American Service & Education Consortium (NAKASEC). Read more at http://nakasec.org/blog.

We just crossed an important hurdle


Dear Fellow PFAW Supporter,

The Senate just voted to move forward on debating a "base" health care reform bill that does NOT include the Stupak-Pitts language attacking a woman's right to choose.

Last week, PFAW and NARAL teamed up to deliver nearly 100,000 petition signatures to Harry Reid urging him to make sure the anti-choice language stays out of the bill. Thank you to the tens of thousands of you who signed our petition. And thank you to those of you who have made a financial contribution to our efforts.

This is just the first hurdle. The debate and amendment process will be long in the Senate, and it's going to be a lot of work to make sure we can keep anti-choice attacks out of the bill. If we are successful, we then need to wage the fight again in the House before a final bill is agreed upon.

The Right will be fighting just as hard as we are. We need to make sure Americans get the health care reform they deserve without the unacceptable sacrifice of women's reproductive health and freedom. In the coming weeks, we'll work with our allies to stage rallies and lobby days, and there will be more chances for activists like you around the country to take action.

In the meantime, if you have not already added your name to the Senate petition, please do so now.

And please consider a donation to this work if you are able to make one at this time.

Once again, thank you for joining me in this important work, and thank you for your ongoing support of People For the American Way.

Kathleen Turner Signature size


Kathleen Turner,
PFAW Activist and PFAW Foundation Board Member

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Booster Shots to reduce the risk of being infected by groupthink


PsySR is an independent, non-profit organization that applies psychological knowledge and expertise to promote peace, social justice, human rights, and sustainability. Our members are psychologists, students, and other advocates for social change in the United States and around the world.

Boosters now available! If you were vaccinated against the 'groupthink virus' over three months ago, you will need to use this 'booster shot'.

Below you will find a series of six booster shots designed by psychologists to reduce the risk of being infected by groupthink. Write down your answers to each of the multiple choice questions and check them against the correct answers available below.

Booster Shots #1

The following quote is from a chapter written by Irving Janis (1997) for the third edition of the book A First Look at Communication Theory by E. Griffin published by McGraw-Hill, Inc.

As the person in charge of the Flight Readiness Review for NASA, Jesse Moore had the ultimate authority to approve or scrub the shuttle mission. He relied on the assessments of managers at the Kennedy, Johnson, and Marshall Space Centers, who in turn consulted with engineers from the companies that designed the Challenger’ s subsystems. The film Apollo 13 dramatized the final phase of this ‘‘go/no-go" launch procedure. NASA has always taken the position that ‘‘a launch should be canceled if there is any doubt of its safety."

The day before the launch, Morton Thiokol engineers warned that the flight might be risky. As the team responsible for the performance of the rocket booster, they worried about the below-freezing temperature that was forecast for the morning of the launch. The O-ring seals had never been tested below 53 degrees Fahrenheit, and as Thiokol engineer Roger Boisjoly later testified, getting the O-rings to seal gaps with the temperature in the 20s was like ‘‘trying to shove a brick into a crack versus a sponge."

The O-ring seals had long been classified a critical component on the rocket motor, ‘‘a failure point—without back-up—that could cause a loss of life or vehicle if the component failed." Yet when Thiokol engineers raised the safety issue in a teleconference, NASA personnel discounted their concerns and urged them to reconsider their recommendation. After an off-line caucus with company executives, Thiokol engineers reversed their ‘‘no-go" position and announced that their solid rocket motor was ready to fly. When the Kennedy, Johnson, and Marshall Space Center directors later certified that the Challenger was flight ready, they never mentioned any concern about the O-rings. At the top of the flight readiness review chain, Jesse Moore had every reason to believe that the shuttle was ‘‘A-OK."

1. Jesse Moore’s leadership at NASA did not avert groupthink in the Challenger disaster primarily because of

a. Lack of impartial leadership

b. Self-censorship of his managers

c. Belief in inherent morality

2. Morton Thiokol engineers probably changed their position for launch because of

a. Homogenous background or ideology

b. Closed-mindedness

c. Pressure toward uniformity

Booster Shots #2

A group of peace activists are attending a meeting to try to stop the US invasion of Iraq in 2003. Arleen comments that the President of the United States is a truly evil and insane man who only cares about the money his friends in the construction industry would make. Jane, Larry, Loretta, and Ricardo quickly agree. When Serena says that it is clear that Saddam Hussein has been a horrendous and brutal dictator, Fiona is critical of her for expressing this view. After hearing Fiona’s retort to Serena, Sam decides to keep his mouth shut. When no one says anything for a minute, Arleen proposes that the group draft a position statement outlining the evilness of the President and the psychological reasons for this diagnosis. Jane, Larry, Loretta, and Ricardo again agree and the remainder of the meeting is spent drafting this statement.

3. Fiona was serving as a ______________ in this group.

a. mindguard

b. devil’s advocate

c. assessor of external stress

4. Sam’s behavior in the group is consistent with

a. a mind guard.

b. self-censorship.

c. close-mindedness.

Booster Shots #3

A group of peace activists are attending a meeting to try to stop the US invasion of Iraq in 2003. Arleen comments that the President of the United States is a truly evil and insane man who only cares about the money his friends in the construction industry would make. Jane, Larry, Loretta, and Ricardo quickly agree. When Serena says that it is clear that Saddam Hussein has been a horrendous and brutal dictator, Fiona is critical of her for expressing this view. After hearing Fiona’s retort to Serena, Sam decides to keep his mouth shut. When no one says anything for a minute, Arleen proposes that the group draft a position statement outlining the evilness of the President and the psychological reasons for this diagnosis. Jane, Larry, Loretta, and Ricardo again agree and the remainder of the meeting is spent drafting this statement.

5. The potential for groupthink might have been lessened in this group if the group

a. had a common ideology

b. would carefully consider alternatives

c. would designate a mindguard to keep the group focused.

6. If Sam would have expressed a belief that the Bush administration were not insane but rationally working from different assumptions, he would have been

a. acting based on a strong ideology

b. engaging in collective rationalization.

c. serving as a devil’s advocate.

Booster Shot #4

7. Which of the following is NOT a symptom of groupthink?

a. Believing in the group's morality.

b. Exercising direct pressure on others.

c. Not expressing your true feelings.

d. Presence of a devil’s advocate in the group.

8. Groupthink usually occurs in groups that are highly cohesive and people want to get along.



9. When a group decides what should be done, it should act and not revisit other options.



Booster Shot #5

10. Which of the following is NOT a solution for groupthink?

a. using a devil’s advocate.

b. using mindguards.

c. using outside experts.

d. using a policy-forming subgroup which reports to the larger group.

11. It is a good idea to have leaders remain impartial.



12. Strong beliefs in the group’s morality is a positive factor in the reduction of groupthink.



Booster Shot #6

Janis describes a story in his book Groupthink (2nd Ed) (p. 8) about a group that was designed to assist middle class men and women quit smoking. Shortly after the group began meeting, one member quit smoking totally and told the other members that they should be strong and just stop “cold turkey”. Immediately after expressing his views, this early quitter was attacked by the other members, who believed that in order to quit smoking a person needs to do so in a gradual way and that sheer will power is not enough. At the next meeting the early quitter essentially told the group that they were correct, that he would continue to participate, that he was smoking two packs of cigarettes a day again, and that he would stop after the last meeting. When Janis and one of colleagues pointed the dynamics of the early quitter’s behavior in a smoking cessation group, the other members reiterated their belief that smoking could only be cured gradually over a long period of time.

13. The early quitter’s smoking of two packs of cigarettes a day after having stopped was a result of

a. highly selective information gathering.

b. group exercising direct pressure to conform.

c. rationalizing poor decision making.

14. The groups’ failure to take the comments of Janis and his colleague seriously was the result of

a. being selective in information gathering.

b. not seeking expert opinion.

c. using a policy forming group.

Check your answers against the correct answers here.

These are the correct answers to the booster questions. Hopefully you go most of them right!

Please invite others to be vaccinated and to receive their booster shots, too!

1. b

2. c

3. a

4. b

5. c

6. c

7. d

8. true

9. false

10. b

11. true

12. false

13. b

14. a

Back to Groupthink Overview

Back to PsySR Homepage

Psychologists for Social Responsibility: What is Groupthink?

Psychologists for Social Responsibility

Building Cultures of Peace with Social Justice

What is Groupthink?

Groupthink, a term coined by social psychologist Irving Janis (1972), occurs when a group makes faulty decisions because group pressures lead to a deterioration of “mental efficiency, reality testing, and moral judgment” (p. 9). Groups affected by groupthink ignore alternatives and tend to take irrational actions that dehumanize other groups. A group is especially vulnerable to groupthink when its members are similar in background, when the group is insulated from outside opinions, and when there are no clear rules for decision making.

Click here to download our PsySR PowerPoint Presentation on Groupthink (8.8 Mb -- Fast connection recommended)

Boosters now available! If you were vaccinated against the 'groupthink virus' over three months ago, you will need to use this 'booster shot'.

References (also see annotated bibliography of books, articles and websites below)

Janis, Irving L. (1972). Victims of Groupthink. New York: Houghton Mifflin.

Janis, Irving L. (1982). Groupthink: Psychological Studies of Policy Decisions and Fiascoes. Second Edition. New York: Houghton Mifflin.

Symptoms of Groupthink

Janis has documented eight symptoms of groupthink:

  1. Illusion of invulnerability –Creates excessive optimism that encourages taking extreme risks.
  2. Collective rationalization – Members discount warnings and do not reconsider their assumptions.
  3. Belief in inherent morality – Members believe in the rightness of their cause and therefore ignore the ethical or moral consequences of their decisions.
  4. Stereotyped views of out-groups – Negative views of “enemy” make effective responses to conflict seem unnecessary.
  5. Direct pressure on dissenters – Members are under pressure not to express arguments against any of the group’s views.
  6. Self-censorship – Doubts and deviations from the perceived group consensus are not expressed.
  7. Illusion of unanimity – The majority view and judgments are assumed to be unanimous.
  8. Self-appointed ‘mindguards’ – Members protect the group and the leader from information that is problematic or contradictory to the group’s cohesiveness, view, and/or decisions.

When the above symptoms exist in a group that is trying to make a decision, there is a reasonable chance that groupthink will happen, although it is not necessarily so. Groupthink occurs when groups are highly cohesive and when they are under considerable pressure to make a quality decision. When pressures for unanimity seem overwhelming, members are less motivated to realistically appraise the alternative courses of action available to them. These group pressures lead to carelessness and irrational thinking since groups experiencing groupthink fail to consider all alternatives and seek to maintain unanimity. Decisions shaped by groupthink have low probability of achieving successful outcomes.

Examples of Groupthink: Past and Present

Examples of groupthink “fiascoes” studied by Janis include US failures to anticipate the attack on Pearl Harbor, the Bay of Pigs invasion, the escalation of Vietnam war, and the ill-fated hostage rescue in Iran. Current examples of groupthink can be found in the decisions of the Bush administration and Congress to pursue an invasion of Iraq based on a policy of “preemptive use of military force against terrorists and rogue nations”. The decision to rush to war in Iraq before a broad-based coalition of allies could be built has placed the US in an unenviable military situation in Iraq that is costly in terms of military deaths and casualties, diplomatic standing in the world, and economically.

Groupthink and the News Media

Knowledge is power and we as citizens and as a nation are becoming less powerful. We face an administration that believes in operating under high levels of secrecy. The American press, especially the television news media, has let down the American people and the American people have allowed this to happen. US television news is geared more toward providing entertainment than information. When one compares the news Americans received about the “war on terrorism” and “war in Iraq” with the news citizens of other countries received, it is easy to see why many Americans were eager to launch an attack on Saddam Hussein while most of the world thought this was not a good idea. The major news networks eagerly voiced almost exclusively the Bush administration’s (questionable) justifications for the attack on Iraq and ignored the voices of millions who knew that other ways of addressing the issues were still possible. Furthermore, the rapid pace of CNN, MSNBC, and Fox News opinion programs makes it difficult for viewers to process information in any depth. Americans need a press that serves as a devil’s advocate to alleviate the ongoing groupthink concerning the war on terrorism and the invasion of Iraq.

Review the following consequences of groupthink and consider how many of them apply to the Bush administration’s handling of the ‘war on terrorism’ and the issues related to Iraq and Saddam Hussein:

a) incomplete survey of alternatives

b) incomplete survey of objectives

c) failure to examine risks of preferred choice

d) failure to reappraise initially rejected alternatives

e) poor information search

f) selective bias in processing information at hand

g) failure to work out contingency plans

h) low probability of successful outcome

Remedies for Groupthink

Decision experts have determined that groupthink may be prevented by adopting some of the following measures:

a) The leader should assign the role of critical evaluator to each member

b) The leader should avoid stating preferences and expectations at the outset

c) Each member of the group should routinely discuss the groups' deliberations with a trusted associate and report back to the group on the associate's reactions

d) One or more experts should be invited to each meeting on a staggered basis. The outside experts should be encouraged to challenge views of the members.

e) At least one articulate and knowledgeable member should be given the role of devil's advocate (to question assumptions and plans)

f) The leader should make sure that a sizeable block of time is set aside to survey warning signals from rivals; leader and group construct alternative scenarios of rivals' intentions.

Annotated Bibliography


Hart, P. (1994). Government: A study of small groups and policy failure. Baltimore:

The Johns Hopkins University Press

In the first book-length study of groupthink since Janis’s work, Paul ‘t Hart has provided a rigorous and systematic version of this influential theory which opens several new avenues for research. Groupthink in government examines the circumstances most likely to produce or counteract groupthink, and applies the theory to issues such as leadership style, risk taking, accountability, and prevention. ‘t Hart’s elaborate case study of the Iran-Contra scandal demonstrates the continuing relevance of the groupthink theory in the examination of flawed decision making.

Janis, I.L. (1972). Victims of groupthink: A psychological study of foreign policy

decisions and fiascoes. Boston: Houghton Mifflin Company.

Janis defines groupthink as the psychological drive for consensus at any cost that suppresses disagreement and prevents the appraisal of alternatives in cohesive decision-making groups. In this, the first edition, Janis showed how this phenomenon contributed to some of the major U.S. foreign policy fiascoes of recent decades: the Korean War stalemate, the escalation of the Vietnam War, the failure to be prepared for the attack on Pearl Harbor, and the Bay of Pigs blunder. He also examined cases, such as the handling of the Cuban Missile Crisis and the formulation of the Marshall Plan, where GROUPTHINK was avoided.

Janis, I.L. (1982). Groupthink: A psychological study of policy decisions and fiascoes.

Boston: Houghton Mifflin Company.

In this edition (2nd), Janis applies his hypothesis to the Watergate cover-up, portraying in detail how GROUPTHINK helped to put the participants on a disastrous course and keep them there. In addition, he presents some new ideas on how & why GROUPTHINK occurs, and offers suggestions for avoiding it.

Kowert, P.A. (2002). Groupthink or deadlock: When do leaders learn from their

advisors? Albany: Blackwell Publishing.

This book argues that too much advice can lead to policy deadlock depending on leadership style. The danger of groupthink is now standard fare in leadership training programs and a widely accepted explanation, among political scientists, for policy-making fiascoes. Efforts to avoid groupthink, however, can lead to an even more serious problem-deadlock. Groupthink or Deadlock explores these dual problems in the Eisenhower and Reagan administrations and demonstrates how both presidents were capable of learning and consequently changing their policies, sometimes dramatically, but at the same time doing so in characteristically different ways. Kowert points to the need for leaders to organize their staff in a way that fits their learning and leadership style and allows them to negotiate a path between groupthink and deadlock.

Journal Articles

Ahlfinger, N. R. & Esser, J. K. (2001). Testing the groupthink model: Effects of

promotional leadership and conformity predisposition. Social Behavior &

Personality: An International Journal, 29(1), 31-42.

This article discusses two hypotheses that were derived from groupthink theory and were tested in a laboratory study which included measures of the full range of symptoms of groupthink, symptoms of a poor decision process, and decision quality. The hypothesis that groups composed of members who were indisposed to conform would be more likely to fall victim to groupthink than groups whose members were no predisposed to conform received no support. It is suggested that groupthink research is hampered by measurement problems.

Esser, J.K. (1998). Alive and well after 25 years: A review of groupthink research.

Organizational Behavior & Human Decision Processes, 73(2-3), 116-141.

This article provides a summary of empirical research on groupthink theory. Groupthink research, analyses of historical cases of poor group decision making are included, and laboratory tests are reviewed. Results from these two research areas are briefly compared. Theoretical and methodological issues for future groupthink research is identified and discussed.

Fuller, S.R. & Aldag, R.J. (1998). Organizational Tonypandy: Lessons from a quarter

century of the groupthink phenonmenon. Organizational Behavior & Human

Decision Processes, 73(2-3), 163-184.

In this paper, Fuller and Aldag argue that the quarter-century experience with groupthink represents an unfortunate episode in the history of group problem solving research. There has been remarkably little empirical support for the groupthink phenomenon, and that the phenomenon rests on arguable assumptions, that published critiques of groupthink have generally been ignored by groupthink researchers, and that groupthink is presented as fact in journal articles and textbooks. They see continued advocacy of groupthink as a form of organizational Tonypandy, in which knowledgeable individuals fail to “speak out” against widely accepted, but erroneous beliefs. They explore the nature and causes of the Tonypandy and encourage researchers to cast off the artificial determinism and constraints of the groupthink model, and instead, seek to inform the general group decision making literature.

Kramer, R.M. (1998). Revisiting the Bay of Pigs and Vietnam decisions 25 years later:

How well has the groupthink hyposthesis stood the test of time? Organizational

Behavior & Human Decision Processes, 73(2-3), 236-271.

This paper explains how in the twenty five years since the groupthink hypothesis was first formulated, new evidence, including recently declassified documents, rich oral histories, and informative memoirs by key participants in these fiasco decisions have become available to scholars. This casts a new light on the decision making process behind both the Bay of Pigs and Vietnam. Much of the new evidence does not support Janis’s original characterization of these processes. In particular, it suggests that dysfunctional group dynamics stemming from group members’ strivings to maintain group cohesiveness were not as prominent a causal factor in the deliberation process as Janis argued. Viewed in aggregate, this new evidence suggests that the groupthink hypothesis overstates the influence of small group dynamics, while understating the role political considerations played in these decisions.

Hart, P. (1998). Preventing groupthink revisited: Evaluating and reforming groups in

government. Organizational Behavior & Human Decision Processes, 73(2-3),


This article critically examines Janis’s recommendations for preventing groupthink in high-level policymaking. It puts forward three models of small group functioning in government, each of which highlights different dimensions of collegial policymaking and distinct criteria for evaluating group performance. Each model also inspires different proposals for groupthink prevention and improvement of group performance in general. The article concludes with an agenda for increasing the policy relevance and practical feasibility of research on political decision groups.

McCauley, C. (1998). Group dynamics in Janis’s Theory of groupthink: Backward and

forward. Organizational Behavior & Human Decision Processes, 73(2-3), 142-


This paper traces groupthink to its theoretical roots in order to suggest how a broader and a more consistent use of research in group dynamics can advance understanding of decision-making problems. In particular, the paper explores and reinterprets the groupthink prediction that poor decision- making is most likely when group cohesion is based on the personal attractiveness of group members.

Moorhead, G., Neck, C.P. & West, M.S. (1998) The tendency toward defective decision

making within self-managing teams: The relevance of groupthink for the 21st

century. Organizational Behavior & Human Decision Processes, 73(2-3), 327-


Groupthink theory has continued relevance to organizations because of the organizational trend toward self-managing work teams. A typology is developed linking the key differentiating characteristics of self-managing teams to groupthink antecedents of group cohesion, structural faults of the organization, and provocative situational context. Building upon this framework, we more specifically examine variables that will impact the occurrence of groupthink within self-managing teams. Implications for the prevention of groupthink in self-managing teams are discussed.

Paulus, P.B. (1998). Developing consensus about groupthink after all these years.

Organizational Behavior & Human Decision Processes, 73(2-3), 362-374.

In the context of these papers of this special issue, the models of groupthink are evaluated. The major focus is on the basis for its impact and its scientific status. The groupthink perspective is seen as consistent with some other contributions to the group’s literature. Interesting parallels between the groupthink and the brainstorming literature are noted. It is conclude that many of the issues raised by the groupthink model are worthy of further examination in a broad-based study of group decision processes.

Peterson, R.S., Owens, R.D., Tetlock, P.E., Fan, E.T. & Martorana, P. (1998). Group

dynamics in the top management teams: Groupthink, vigilance, and alternative

models of organizational failure and success. Organizational Behavior & Human

Decision Processes, 73(2-3), 272-305.

This study explored the heuristic value of Janis’ (1982) groupthink and vigilant decision-making models as explanations of failure and success in top management team decision making using the Organizational Group Dynamics Q-sort (GDQ). Top management teams of seven Fortune 500 companies were examined at two historical junctures—one when the team was successful (defined as satisfying strategic constituencies) and one when the team was unsuccessful. Results strongly supported the notion that a group’s decision-making process is systematically related to the outcomes experienced by the team. The results illustrate the usefulness of the GDQ for developing and empirically testing theory in organizational behavior from historical cases.

Raven, B.H. (1998). Groupthink, Bay of Pigs, and Watergate reconsidered.

Organizational Behavior & Human Decision Processes, 73(2-3), 352-361.

In this paper, Raven argues that group decisions have often been seen as offering the benefits of collective wisdom, but may also lead to disastrous consequences. Groupthink then focuses on the negative effects of erroneous group decisions, the two major examples being the disastrous Bay of Pigs, which then led to the Watergate scandal. While Janis seems to suggest that groupthink will ultimately lead the group to fail in its ultimate endeavors, we need to consider the frightening possibility that in the case of the Nixon group, the group actions came close to being successful.

Schwartz, J. & Wald, M. L. (2003, March 03). Smart people working collectively can be

dumber than the sum of their brains: “Groupthink”is 30 years old, and still going

strong. NY Times. Retrieved February 20, 2004, from Ebsco database.

This issue came into sharp focus in Houston in 2003 at the first public hearing of the board investigating the Columbia disaster last month. Reprinted at: http://www.mindfully.org/Reform/2003/Smart-People-Dumber9mar03.htm.

Street, M. D. & Anthony, W. P. (1997). A conceptual framework establishing the

relationship between groupthink and escalating commitment. Small Group

Research, 28(2), 267-294.

This article presents three propositions designed to demonstrate a theoretical relationship between the groupthink and escalation commitment models. Proposition that groups exhibiting groupthink characteristics are more likely to escalate commitment to a losing course of action than are groups not exhibiting groupthink characteristics.

Turner, M. E. & Pratkanis, A. R. (1998). Twenty-five years of groupthink theory and

research: Lessons from the evaluation of a theory. Organizational Behavior &

Human Decision Processes, 73(2-3), 105-115. Retrieved January 20, 2004, from

Ebsco database.

This is from a special issue on theoretical perspectives of groupthink, a twenty-fifth anniversary appraisal. The article examines the historical development of the groupthink model of decision-making processes and discusses recent responses to the body of empirical evidence amassed on the model. The article concludes by articulating general lessons implied by the evolution of research on the groupthink model.

Whyte, G. (1998). Recasting Janis’s groupthink model: The key role of collective

efficacy in decision fiascoes. Organizational Behavior & Human Decision

Processes, 73(2-3), 185-209.

This paper advances an explanation for decision fiascoes that reflects recent theoretical trends and was developed in response to a growing body of research that has failed to substantiate the groupthink model (Janis, 1982). In this new framework, the lack of vigilance and preference for risk that characterizes groups contaminated by groupthink are attributed in large part to perceptions of collective efficacy that unduly exceed capability. High collective efficacy may also contribute to the negative framing of decisions and to certain administrative and structural organizational faults. In the making of critical decisions, these factors induce a preference for risk and a powerful concurrence seeking tendency that, facilitated by group polarization, crystallize around a decision option that is likely to fail. Implications for research and some evidence in support of this approach to the groupthink phenomenon are also discussed.

Web Sites

Groupthink Central: http://www.groupthinkcentral.blogspot.com/

This website is for groupthink central, and has the following quote by Walter Reuther. "There is no greater calling than to serve your fellow men. There is no greater contribution than to help the weak. There is no greater satisfaction than to have done it well." --

A First Look at Communication Theory: http://www.afirstlook.com/main.htm

This website is primarily designed as a companion to communication theory by Em Griffin and the Instructor’s Manual by Glen McClish, and Jacqueline Bacon. This site includes links to resource materials for texts, and a description of Conversations with communication theorists, a video of the interviews conducted with the authors of a number of theories featured in the book. Links to theories in the current (5th) edition can be found, as well as theories in the archives of past editions.

Chapter 18 by Irving Janis, in the book A First Look at Communication Theory (1997), by Em Griffin http://www.afirstlook.com/archive/groupthink.cfm?source=archther..

In this chapter, Janis discusses the events behind the Challenger disaster, as a model of defective decision-making. He describes the mode of thinking and how people in a cohesive group have a tendency to seek concurrence with others in the group to finalize their decisions. The chapter outlines the eight symptoms of groupthink, and offers a critique on avoiding uncritical acceptance of groupthink.

Errors and Accidents: Groupthink http://www.ess.ntu.ac.uk/miller/error/groupthink.htm#linking.

This BSc Psychology website developed by Hugh Miller and Bill Farnsworth at the Nottingham Trent University offers chapters on Groupthink by Irving Janis and others.

Argos Press GROUPTHINK Risk Management and Decision Making Glossary: http://www.risk-management.argospress.com/groupt.htm.

This website is a glossary to risk management and decision making, systems thinking, and situation awareness. This site has a comprehensive glossary of utility terms and a Peer Tool that can be ordered free online to guide the group towards making better decisions.