Thinking and Believing

You might think (believe) that there is a strong connection between thinking and believing. But it's worth making the distinction prevalent in European languages. "Belief" is an attitude towards a "thought", whereas "thinking" is relating a "thought" to one or more other thoughts. In principle, though not, as far as I know, in practice, belief may be static, a "state" rather than a "process". "Thinking", in the sense of relating or manipulating thoughts, is always, almost by definition, a process.

UK House Prices and the Inability to Think

Ever since the US sub-prime mortgage difficulties started to have an effect in the UK, it has been obvious that house prices would fall. The inevitability of this has been downplayed, of course, because almost all experts and informed commentators have a vested interest in avoiding falling prices. And, to be fair, a "soft landing" might have been a result worth pursuing for the greater good. Never mind the relatively few unfortunates who might have been spared a poorly timed house purchase.

So how far will prices fall, and how quickly? Nobody knows how to predict the trajectory accurately. In part this is because individuals will not behave rationally or with predictable irrationality. And the net effects of all those unpredictable behaviours, though less unpredictable, is far from being subject to immutable laws. Despite the overwhelming likelihood that the property will be cheaper next month and cheaper still next year, people will agree to buy houses tomorrow, and the next day, and the next... Does this represent an inability to think?

The key to the apparent paradox, it seems to me, is that people have to live somewhere. To swap one £200k house for another £200k house is no more irrational than staying in the first house. So what stops a significant number of people from selling up, waiting for prices to fall, and buying back into the market at a lower level? There are the costs of accommodation and storage for the interim period, plus transaction charges of between 2% and 6%, not to mention the hassle factor. But the most significant reason is likely to be simply a lack of buyers.

If you don't own a house at the moment but are in a position to buy one, the prudent course of action appears to be to wait. But for how long? That depends on what happens to house prices while you are waiting! As house prices continue to fall, the long-term mortgage costs converge with long-term rental costs. Full convergence is unlikely, since that would imply an expectation that the property would have zero value at the end of the mortgage term. This argument from investment fundamentals should put an effective floor under general property prices.

Before we can arrive at a view on what this floor is likely to be, we need a view of long-term rental costs. The fact is that these ultimately depend on future house prices, but this recursive relationship is hardly fatal. A perfectly reasonable assumption, in the absence of complicating factors, is that rents will increase at least in line with incomes. This assumes that demand for rented accommodation does not fall. It is only likely to fall if something approaching convergence of rental and ownership costs is achieved. So... a property that could be rented for £500 per month today would be worth buying at a price that is somewhat in excess of the repayment mortgage that could be afforded for £500 per month.

Assuming mortgage interest rates of 5% (which is not a prediction, just an assumption for the purposes of illustration), and a term of 25 years, this would be £85k. How much more than £85k would it be reasonable to pay? If you assume that the value of the property in 25 years will be at least £85k in today's money (I said: "if") then you can add about £283 per month "savings" to the £500 "rent", suggesting a price of £134k. Repeatedly applying the same logic allows us to calculate a ceiling price of £199k, at which point repayments of £1163 per month would be equivalent to £500 rent and £663 per month savings (£199k in total, give or take £100).

A higher mortgage interest rate feeds through into lower floors and ceilings, but properties in general do not look expensive when viewed simply as an equivalent to renting and saving. This is despite the facts that most buyers, rightly or wrongly, expect to sell (eventually) at a higher price than they are paying, and to have to pay increasing rents if they didn't buy. What keeps prices below their "fundamental" ceiling is limited availability of funds. Until recently, availability of funds has been mainly limited by affordability. Now, lenders are increasingly reluctant to lend, which is further reducing availability of funds and, inevitably, in the short term, leading to lower prices.

Conclusion: house prices in the UK are reasonable, but today only a fool (or a philanthropist) would increase their investment voluntarily.

Circumscription: who or what "thinks"

One way to begin clarifying any concept is by identifying a boundary within which the concept lies. This process is called "circumscription". In a hierarchy of concepts, you can circumscribe a concept by identifying the more general category to which it belongs (thus a "lion" is a species of "big cat") or by enumerating the more particular categories that the concept comprises (thus the "cat" family comprises "big cats" and "small cats").

In stating that "thinking" is a "process" I am beginning this sort of definition process. It is customary to qualify "thinking" further by defining it as a "mental" process, but there is no need to suppose a priori that only "minds" can think or, indeed, that minds only think. We may not be surprised to arrive at this conclusion, but for the time being let's just consider who or what might legitimately be described as engaged in the process of thinking.

The only thinking that I'm familiar with is animal. In saying this, I'm not asserting that there is, for example, no botanical thinking (although I doubt that there is), nor am I expressing scepticism about artificial intelligence, divine intelligence or extra-terrestrial intelligence (just that I am not aware of having any experience of these). The question is: Is "thinking" the exclusive preserve of animate beings?

I think the answer is yes. If there were compelling evidence that Mount Kilimanjaro, say, could think, then I imagine I would be forced to conclude that Mount Kilimanjaro is an animate being! Of course, I appreciate that there is a circular argument here. But this corresponds to the limits of my imagination. For although life without thinking seems highly plausible, thinking without "life" does not. So that if thinking occurs where there is no (other) sign of life, it seems it would be my understanding of "life" that would need to change, not my understanding of thinking.

That's enough philosophising for now. Two questions I'll leave open for the time being: Do communities or organisations "think"? What about (assuming their existence for the sake of argument) God or gods?

Fundamentals

I couldn't resist beginning this blog with a little wordplay!

The "mental" in "fundamentals" has no etymological connection with the "mental" of mind, but there is a connection in my brain and, perhaps, in yours too.

The posts in this blog will explore how people think, both in general and in particular cases. I have long been fascinated by the topic of thinking, and by how little attention people in general pay to it. But the immediate provocation for (and proximate cause of) this blog is a post on Dr Luke Houghton's Problem Solving blog. Credit where credit's due...

Now the aforementioned post was on the topic of "Lateral Thinking". It would be premature to start talking about that topic on this blog, save to note that it is a style of thinking and therefore on-topic.

Well...I'm determined to keep it snappy, so I'd better say something fundamental about thinking! Thinking is a process and a thought is a snapshot of that process. Think about that for a while. We'll explore this idea further in a later post.