Confidence Itself

Its bizarre evolution from a subjective emotional state to a leading economic indicator

According to popular textbook histories of the twentieth century's greatest national scandals, from the fixing of the 1919 World Series to the quiz-show fraud of the 1950s to Watergate, there are certain ritual stages of emotion that the American public passes through after discovering that it's been had. First comes shock—the so-called "loss of innocence," which, unlike a physical deflowering, is never so irrevocable that the same purity can't be spoiled again a decade or two later. Next comes a period of "national soul-searching," which for the literal-minded conjures up images of solid citizens abruptly dropping to their knees in prayer or falling silent at the supper table as their children barrage them with painful questions. Then on to the "widespread calls for reform" that break out spontaneously wherever there are crowds and rattle the tall towers of the elites, who immediately demand congressional hearings. And finally it arrives, the denouement, after the subpoenas and suspensions and blue-ribbon inquiries: "Confidence is restored."

In the past the target audience for these show-trial purges—these theatrical mass dark nights of the soul—was presumably America's children, because the likelihood was that anyone over twenty had already lived through one such solemn reckoning and had seen how ingeniously and swiftly fraud and chicanery regenerate themselves. And yet, according to the traditional wisdom, there was still real value in the exercise for the nation as a whole. The spectacle of disillusioned young folk ("Say it ain't so, Joe!") reminded the elders that they, too, were trusting once, and that it is good to trust and bad to break trust, and that we can, and must, and will, do better—if only to supply our children's children with their own share of trust and belief to be conned out of.

But how will the script read this time, if there is one? The occasion to revive that old morality play of disillusionment, panic, and despair that leads at last, painstakingly and gradually, to the re-establishment of good faith has come round again, and in spectacular fashion. The nation is soaked to the skin in fraud and fakery. It's standing waist-deep in a cistern of deceit under a drenching downpour of rigged ledgers, plagiarized best sellers, stolen gold medals, spoiled ballots, creepy-crawly priests, fictitious movie critics, padded résumés, insider stock trades by zillionaire faux homemakers, term papers downloaded off the Internet, journalists with nonexistent sources, fiber-optic lines that run from nowhere to nowhere, engineered energy shortages, intelligence agencies that don't return their operatives' urgent calls, investment gurus who don't buy what they sell, ex-Presidents posing as motivational speakers, and rubbery lumps of composite aquatic protein that far too many markets label "crab."

Loss of innocence may be highly unlikely at this late date, but the next step, national soul searching, would certainly seem to be in order. And yet it resolutely isn't happening—at least not on the scale one would expect. If, as the pop historians report, throwing a few games of the World Series and slipping a right answer now and then to especially attractive game-show contestants was enough to shake the nation's moral underpinnings, then shouldn't this vast, domed Roman amphitheater of billion-dollar scams and switcheroos and multi-stage, multi-year institutional ruses, not to mention the chronic routine cheating that fills in the gaps between the superhoaxes, be enough to rattle our self-assurance?

No, because our new vision of how things work—economies, sports teams, governments, corporations—and of what can cause them to cease to work doesn't permit self-indulgent negativity. Time was when strength, stability, and prosperity were thought to stem from the nation's moral worthiness, the soundness of its fundamental principles. But lately we've been taught, and many believe, that all good things come, at bottom, from proper attitudes—from our collective psychological posture toward events that we have scant control over, except in choosing how we'll respond to them.

The key is confidence—confidence itself. Dale Carnegie said so. The sports psychologists say so. Oprah Winfrey says so. And the U.S. government says so too, by placing its seal of approval on a statistic—the Consumer Confidence Index—that is issued monthly by something called The Conference Board, a prestigious panel of economists and industrialists founded back in 1916 as American industry's response to a spreading public skepticism about the basic integrity of big business.

From subjective emotional state to leading economic indicator—that's the magic The Conference Board has worked with human confidence. And it's not that the board members have developed some high-tech instrument for monitoring the pulses in consumers' neurons; no, they just ask people, 5,000 of them a month, how they're feeling. Do they want to buy something? The responses are tabulated, analyzed, and released with much fanfare to the financial establishment, which quickly turns them—by executing market decisions that by this stage represent feelings about feelings—into seemingly science-based self-fulfilling prophecies.

This can make for a gigantic spiral of self-delusion if the reason consumers are feeling optimistic is that they've been lied to about their own condition —lied to about the health of their investments, or pumped up about the prospects of their employer. But is that such a bad thing if it breeds confidence? Indeed, logic suggests that a little self-delusion is probably a good thing in such a system, and maybe even a necessary thing. According to the alchemy of confidence, soft perceptions can, in time, be leveraged into solid economic realities. Think and Grow Rich—it isn't just the title of a perennial best-selling self-help paperback; its premise is the soul of the American machine that created the nineties trompe l'oeil golden age and might still be able to produce a silver one.

Knowing this, is it really any wonder that some of the folks who've been running the machine fudged a third-quarter EBITDA here and there in an attempt to spread that rosy feeling? Or that they paid for acquisitions that weren't worth the price by technical measures but might, through some ego boost brought on by feeling so wildly desired, eventually close the valuation gap by dint of sheer American zoom and zip?

From the archives:

"On Plagiarism" (April 2002)
In the wake of recent scandals some distinctions are in order. By Richard A. Posner

Yes, kids, you can cheat your way to legitimacy—like the Washington Post reporter who wrote a book and bought truckloads of copies to push it onto best-seller lists. Or like the historians who lift from others' books, perhaps reasoning that when their books hit it big, the other books (not hits) would quickly be forgotten and the carping of jealous nobodies wouldn't stick. Confidence plus some cash (or a good credit line, or a few borrowed chapters, or an Internet concept) equals cash abundant and status squared. That's the latest theory, at least, and though, like socialism, it hasn't yet worked perfectly in practice, and in fact has caused several major disasters, who wants to be the first to abandon it—to desert the bright "yes" team for the gloomy soul-searchers and possibly set off (who knows?) the next depression?

That loss-of-faith and hitting-bottom ritual just doesn't pay the way it used to, we fear. Though we also fear—from way, way back in our moralistic, Old Testament brain stems—that tolerating fakery can have costs. So here we stand, wised up but not depressed, feeling abused but not ready to cut and run, paralyzed by a cost-benefit analysis that, if we're able to be honest with ourselves, we secretly hope will finally be dealt with for us by events—events that we'd rather not contemplate just now.