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The Reasons for Irrationality

by Don Curren | August 13, 2020

Nothing perplexes rational people so much as irrationality.

I’m thinking specifically about irrational belief systems rather than illogical behaviour or any of the myriad of forms of irrationality.

Rational people of my acquaintance (often traders or economists – and even journalists, sometimes) will frequently ask, while shaking their heads in astonishment, “How can that person possibly believe… “

They will then proceed to list all the evidence and reasoning that makes such a belief impossible.

They are, perhaps, looking at it the wrong way.

I believe that the explanation for many (but not all) irrational beliefs doesn’t lie in inaccurate data or incorrect reasoning.

It lies in an entirely different dimension, but one that many highly rational people can’t see, perhaps because of their rationality.

I’ll use an example to explain what I mean, but I’ll use a hypothetical example to avoid impugning anyone’s actual beliefs.

Say a new disease appears in a remote country. It’s a hitherto unheard-of infection that spreads rapidly and can cause a remarkably wide range of symptoms, up to and including death. Because it’s believed to have originated in crows, it’s called “CORVID-20.”

The disease spreads rapidly despite the best efforts of authorities to contain it. Societies all over the world are affected, hospitals overloaded, economies shut down. Some countries are successful in quelling its spread. Others not so much.

It would seem illogical, in those circumstances, to adopt a belief system that denies the existence of the disease and ignores the practices that might help restrain its spread – in this entirely hypothetical instance, of course.

So where do such unreasonable ideas come from?

This is where rational people often make their mistake.

They’re confused by the outward form of the belief systems in question. They look deceptively like reasonable points of view.

They come in the form of propositions linked together in coherent systems, and they sometimes can reflect some very involved – and in themselves – convincing chains of logic. They are usually based in what their adherents perceive as “facts” – although they are often “alternative facts.”

And – particularly in the sphere of economics and financial markets – they are often expressed in a calm, reasonable way by well-educated people who are held in high regard by society.

But appearances can be deceptive, and in this case, they are. Despite superficial similarities, rational and irrational belief systems don’t originate in the same kind of process.

Unreasonable beliefs often stem from an ancient and deep-seated need to find meaning in the world, and don’t harness the tools of observation, inference and deduction that are instrumental in achieving true and reasonable beliefs about the world.

Let me explain what I mean.

The need for meaning is a – and perhaps THE – fundamental need of human beings.


One of the most eloquent and powerful explorations of the role of meaning in human experience is found in the classic “Man’s Search for Meaning” by Viktor Frankl. A psychologist by training, Frankl was imprisoned in a concentration camp in WWII. His wife, father, mother and brother all died in Nazi death camps. Only he, and one sister, who escaped to Australia, survived.

Frankl believed that the ability to find meaning enabled human beings to survive the direst circumstances.

“Life is never made unbearable by circumstances, but only by lack of meaning and purpose,” Frankl wrote.

The constant change that characterizes the modern world often deprives people of the sense that their lives possess meaning – a phenomenon explored by political philosopher Hannah Arendt in her book The Origins of Totalitarianism.

Technological, economic and social change can uproot lives and leave a void behind – leaving individuals with an empty space to fill. As Arendt put it, “human beings need the constant transformation of chaotic and accidental conditions into a man-made pattern of relative consistency” – ie, meaning.

Arendt believed that one of the reasons for the success of totalitarian ideologies was that they offered an explanation of life that restored some sense of coherence – of meaning – to those who had been deprived of their sense of the meaningfulness of life.

It’s not just power-hungry political leaders who work this way. There are many potential sources of meaning to fill the vacuum created by incessant change – belief systems derived from science, economics, religion, consumerism, etc.

One of the most fertile sources is the realm of conspiracy theories.

To return to our hypothetical example: if people adopt a system of beliefs that makes life meaningful, they will doubt things that seem self-evident to others, for instance that a disease is serious and can be contained by taking certain measures.

They may be presented with evidence for the falsity of their views, but their need to maintain the belief system that gives their lives meaning will result in them developing alternative explanations for those facts – in this case, that the disease is all an elaborate hoax.

This phenomenon isn’t restricted to matters of science and common sense, of course. When searching for meaning in the financial markets, people often invent simple, moralistic and deterministic stories to explain what is happening.

They can persist in believing these stories for decades at a time, despite being bombarded with evidence showing markets are complex, amoral and non-linear.

It may seem like a discouraging explanation for those who value reason.

But most people aren’t entirely rational or irrational. Most of us have our blind spots, as well as things we are entirely lucid and logical about. It’s like there’s a spectrum that stretches from the perfect, unemotional rationality of Mr. Spock to the conspiracy-theorizing irrationality of Alex Jones.

Most of us move along the spectrum, all the time, and by engaging in calm and open-minded discussion – even with those we disagree with – we can help each other grow more open to reason.

Another way of bolstering the force of reason is to support the institutions conducive to it.

Rationality doesn’t exist in a social vacuum. It needs to be supported and nurtured by institutions, including education at all levels and healthy, independent media. In his book Down to Earth: Politics in the New Climactic Regime, the French philosopher Bruno Latour made the following observation: “Facts remain robust only when they are supported by a common culture, by institutions that can be trusted, by a more or less decent common life, by more or less reliable media.”

The most effective way of combating irrationality is to create a society in which people can find a sense of meaning. A society in which everyone’s contribution is valued, and everyone has a purpose.

That might take a while.

In the meantime, perhaps we should work on the “decent common life and “reliable media” and “institutions that can be trusted” cited by Latour.

It would, after all, be the rational thing to do.

Don Curren
Market Strategist and Content Editor

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