Yesterday, I started talking about Ayn Rand. Specifically, I may have called her a psychopath.

And I wanted to talk a bit more about that.

What Makes A Psychopath*?
*Psychopath and Sociopath are often used interchangeably – although sometimes, they are used to distinguish whether the source of the condition is nature (psychopathy) or nurture (sociopathy).

We have a very Hollywood idea of what a psychopath is. They generally tend to look like Christian Bale; there’s often a chainsaw involved; and occasionally, they talk about Fava beans and a nice Chianti.

But in the real world, sociopaths and psychopaths are just popular names for subtle variations in the antisocial personality disorder diagnosis. And having that diagnosis doesn’t make one evil. It could just make you Benedict Cumberbatch Sherlock.

According to M.E. Thomas (author of “Confessions of a Sociopath”), modern psychology doesn’t have near enough to say about sociopaths, having focused almost entirely on the criminal side of things. And there is a seven symptom diagnosis in the DSM, where if you answer “yes” to three or more, chances are…

Here they are:

1. Regularly breaks or flaunts the law
2. Constantly lies and deceives others
3. Impulsive, prone to risk-taking
4. Prone to fighting and aggressiveness
5. Little regard for the safety of others
6. Irresponsible
7. Does not feel remorse or guilt

So let me focus on three of those:

1. “Impulsive, prone to risk taking” as a symptom presumably means “more likely to take risks than your average human being”. And given that we generally tend to suffer from loss aversion biases that make us prone to not taking risks – this type of “symptom” is a relative description of individuals that do not have that these behavioural biases in their decision-making.
2. “Little regard for the safety of others” sounds like someone that is almost uniquely self-interested.
3. “Does not feel remorse or guilt” seems reasonable to me. Because remorse and guilt are irrational – you only need to observe whether or not your decision was a good one or not, and then make another decision and move forward.

And if you look at those three characteristics, then what I just described is Homo Economicus – the Rational Man.

Which, in some ways, makes a lot of sense.

To be completely rational is to be completely inhuman (if you use the term “human” as a synonym for “displaying empathy”). It’s a logical computation of probabilities, risks and outcomes. And even if other people’s feelings are taken into account – it’s not down out of a empathy or moral conscience – it’s done as a part of the risk assessment process.

Here is Ayn Rand speaking on emotions:

“Man is born with an emotional mechanism, just as he is born with a cognitive mechanism; but, at birth, both are “tabula rasa.” It is man’s cognitive faculty, his mind, that determines the content of both. Man’s emotional mechanism is like an electronic computer, which his mind has to program—and the programming consists of the values his mind chooses.” (taken from The Virtue of Selfishness).

For me, these are some of the more self-evident concerns in the Ayn Rand philosophy:

1. That we’re all psychopathic in our decision-making;
2. That Utopia exists when we’re all equally clever psychopaths; and
3. If you’re not a psychopath, or if you’re less clever than the other psychopaths, then that’s your own fault, and that’s why you’re poor.

Yes – I realise that I’m probably simplifying and slandering all at the same time.

But the trouble is that Homo Economicus seems to have all the hallmarks of being a psychopath.

And by some estimates, only 7% of the population are good versions of Homo Economicus (the Japanese did a study on it – read this Forbes article that does the summarising in readable English).

To Be Clear

I’m not saying that psychopaths are evil, or that they result in bad outcomes for everyone.

I do think that psychopaths are more likely to be rich and powerful. They take more risks, and they’re more calculated. Probability alone suggests that this makes them more likely to end up at the top.

Which again, need not be a bad thing, provided that the other 93% of us still provide utility to the super-rational.

But I do question whether our economic theories should be based on the assumption that the most-realistic version of our selves is psychopathic. And I also question whether it’s appropriate to say “Let’s have free markets – after all, we work best when we’re all self-interested.” Because for the most part, we’re not equally self-interested.

And not everyone has the “good fortune” to be born a clever psychopath.

To be continued.

Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.