When Rational Thinking Fails

I'm sure that most of us have had the experience of sitting on a train that has not yet left the station and seeing another train across the tracks that is also at a stand still. One of the trains starts moving and we think "finally, we're going" only to see the other train leave our field of vision and then realize we are still sitting at the station. Moving and not moving looks the same.

But this is not always true, sometimes are eyes trick us another way. Natalie Angier writes in today's NY Times about how we perceive motion and our body's movement. She writes about about an easy experiment to try:

"If you want to glimpse the handiwork of one of your body’s unsung sensory heroes, try this little experiment. Hold your index finger a few inches in front of your face and sweep it back and forth at a rate of maybe once or twice a second. What do you see? A blurry finger. Now hold your finger steady and instead shake your head back and forth at the same half-second pace. This time, no blur, no Marcel Duchamp’s “Nude Descending a Staircase” effect. The finger stays in focus even as your head vigorously pantomimes its denial. "

If we can't trust our perception of reality then how can we trust the resulting behavior. David Brooks, also in today's NY Times, writes about how this relates to the economic crisis we face today. He quotes from Taleb's book, "The Black Swan" which I have listed in the right hand column. If you still believe in rational markets, it's a must read.