Nadal’s rule

On Thursday, July 8, when he announced that he was leaving the Wimbledon tournament due to his abdominal injury, Rafa Nadal, sad but resigned, justified his decision with great wisdom:

“This way I can’t win. If I continue, the injury will get worse (…) I was in a privileged situation with real options. But life goes on. I have no reason to feel sorry for myself. I look forward with hope”.

In my opinion, Nadal’s sporting success is based not only on his physical abilities and his ability to sacrifice, but also on that healthy vital attitude – looking exclusively to the future – when he suffers an injury, is defeated or loses a point.

(For this reason, contrary to the general forecast, he did not consider a reason to retire an event that was already past: his victory this year at Roland Garros).

Expired water

Nadal therefore strictly applies an essential principle of rationality that, reflected in the popular sayings “old water, no mill moves” or “what is past is past” (bygones are bygones), justifies the economists’ criticism of the so-called “sunk cost fallacy” (sunk cost fallacy).

The American economist and Nobel Laureate in Economics Richard Thaler devoted a chapter to this fallacy in his entertaining book Misbehaving (2016). In one of his examples, if on a blizzard Sunday two football-loving friends are pondering whether or not to go to the game, and one of them happens to get the ticket for free while the other pays for it out of pocket, it is most likely that it is the latter who ends up dragging both to the field, so as not to “waste” the money already spent or “sunk cost”.

Thaler explains that we commit this fallacy because we keep “mental accounts” (mental accounts) and we suffer loss aversion (a term that, usually translated as “aversion to loss”, seems to me more illuminating to translate as “aversion to being dispossessed” or deprived of something that we already had for ours).

According to Thaler, human beings do not treat our money and wealth as a homogeneous fungible good, so that, when making an economic decision, we take into account its marginal impact on our global wealth: we use, instead, small “little boxes”. ” or separate mental accounts in which we settle the costs and benefits that we consider directly related to each account. Therefore, if we have paid the price of a ticket (investment) but did not go to the show, we must record a “loss” in that mental account, just like a bank that is forced by accounting rules to write off a loan. To avoid this, we will be willing to face personal inconvenience – going to the show, even if we don’t feel like it – to maintain the fiction that the investment was successful.

Many historians and economists saw in the Vietnam War a political illustration of the escalation risk that the “sunk costs” fallacy” entails: the more casualties of American soldiers, the more President Johnson felt obliged to continue the war, so that those killed in combat “would not have died in vain”.

The fallacy of sunk costs is not the only case in which our excessive attention to the past prevents us from fully rational behavior.

All those investors in equities for whom the sharp fall suffered by the Stock Markets in 2022 is raising a doubt are probably experiencing another case: the falls will continue and the losses will worsen (if the markets have not yet reflected a probable recession) ? But if the markets are “efficient,” shouldn’t they already have priced in those gloomy macroeconomic prospects, making it likely – though not certain – that stock markets will stabilize or perhaps improve from now on?

Those who fear the former more should sell and those who believe more in the latter should maintain their positions or even buy. In theory, setting aside tax considerations, that decision should be independent of whether or not the investor still has, after recent stock market crashes, a latent capital gain in his portfolio. financial psychologyBehavioral Finance) predicts, however, that those who are still “winning” will, like the lucky player, have more money than when they started playing and, consequently, be betting with “casino money” (house money), more inclined to maintain their bet on equities and take risks, even if they feared a new stock market correction.

This fact is confirmed by the frequent and irrelevant question of the (bad) adviser who someone asks if, given the market situation, he should sell a share or not: “But at what price did you buy it?”

Thus, even in the face of an uncertain stock market future, attention to the past will disturb the economic rationality of our decisions.

memory sickness

The Spanish politicians who, after Franco’s death in 1975, promoted the Transition to democracy displayed the same wisdom and rationality that inspires the “Nadal rule”: instead of trying to settle accounts with the past, they agreed – with the vote against the then Popular Alliance of Manuel Fraga – in approving a Amnesty Law (1977) and make “a clean slate”. It is undeniable that the entrenchment of Francoism in the Army – which was reflected in the attempted coup of 23-F 1981 – facilitated the approval of the law: but, in my opinion, it was a rational decision, a reflection of the fact that ” life went on”, it was necessary to look to the future and leave the investigation of the past to professional historians. In the famous intervention of Marcelino Camacho during the debate on the project in Congress “how could we reconcile those of us who were killing each other if we didn’t erase that past forever?”

But since the time of President Rodríguez Zapatero, both the left-wing parties and the Basque and Catalan pro-independence parties have seen in the memory of the Civil War and Francoism and in the “cult of memory” a great political opportunity to assert their anti-Francoism as a source of moral superiority, unite their supporters and mobilize them against rival parties.

Months ago, in “The Aberrations of Memory,” I recalled the words of the late Franco-Bulgarian linguist and intellectual Tzvetan Todorov in Abuses of memory (nineteen ninety five):

“In the modern world, the cult of memory does not always serve good causes, something that does not have to be surprising. The commemoration of the past knows a climax in Nazi Germany and Fascist Italy and could be added to this Stalinist Russia ready”.

He also cited other similar ones by D. Manuel Azaa: “Looking for reasons of enmity in the past and interpreting History to make it serve as food for hatred is an aberration, an anti-civilizing delusion.” I concluded by pointing out that the political invocation of the past can be an inexhaustible source of victimization, hatred and revenge that, by fueling conflicts, poison the present and cast a shadow over the future.

It must be recognized, however, that, as in economics, the past always exerts an unhealthy political influence that the deliberate cultivation of emotions allows to stir up and make profitable.

It is not by chance that the current left-wing and nationalist political coalition has been promoting the Democratic Memory Bill and approved it in Congress on Thursday, July 14. The project already had Orwellian overtones from the beginning, no matter how much it lavishes the adjective “democratic”, but its final version has been agreed with EH Bildu, a legal party with great electoral support in Euskadi, but with deep roots in terrorism. of ETA, is a serious sarcasm.

I am glad, therefore, that the leader of the Popular Party, Mr. Feijo, announced on Saturday July 9 in Ermua that if he wins the next general election he will try to repeal it.

I have great respect for professional historians, but I distrust and even disgust those politicians, citizens or artists who, champions of “memory” and the cult of their version of the past, continue to be obsessed with the Civil War, the crimes of Francoism, the dictatorship, the heroism of conseller Rafael Casanova, the story of the Guernica oak or the deeds of Don Pelayo or imperial Spain.

Let’s leave the study and interpretation of the past to professional historians and, like the architects of the Transition, let’s follow the “Nadal rule”: let’s look only forward.

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Nadal’s rule