5.1The claim
The second half of Mackay's chapter tells of the reckoning, and it shows outcome bias at the scale of a legislature. Mackay says that punishment was demanded before guilt was known, and reports that the inquiry found the company's books falsified, torn and destroyed, so that decisions could not be reconstructed from the material of the time. He then quotes at length a dissent by Edward Gibbon, grandson of a director, which condemns the proceedings as judgment by outcome and reputation, and one detail Gibbon cites as injustice appears earlier in Mackay's own narrative as fitting retribution. Read beside the synthetic post-mortem record, the case adds to the debate between the first and third positions: outcome bias describes the judges, and the state of the books shows why the first position's remedy is often unavailable.
5.2Punishment before guilt
Mackay is explicit that the first response to the collapse came before any inquiry. After describing petitions from across the country, he writes:
Nobody seemed to imagine that the nation itself was as culpable as the South-Sea company. Nobody blamed the credulity and avarice of the people,--the degrading lust of gain, which had swallowed up every nobler quality in the national character, or the infatuation which had made the multitude run their heads with such frantic eagerness into the net held out for them by scheming projectors. These things were never mentioned. The people were a simple, honest, hard-working people, ruined by a gang of robbers, who were to be hanged, drawn, and quartered without mercy.
And then:
This was the almost unanimous feeling of the country. The two Houses of Parliament were not more reasonable. Before the guilt of the South-Sea directors was known, punishment was the only cry.
Here the narrator sees a bias like the one his own Preface displays. The country, in his telling, put the whole blame on the directors. Mackay's correction puts much of it on the people: their "credulity and avarice", their "lust of gain". Both assignments are made from the outcome; the country judges the directors by the ruin, Mackay judges the country by it. Neither asks what any buyer or director knew at the moment of buying or directing.
Luhmann (1993) separates risk, a possible loss attributed to one's own decision, from danger, a possible loss attributed to something outside one's control. The petitioners, in Mackay's account, told the loss as a danger, done to an honest people by others; Mackay retells it as a risk the people brought on themselves by buying. The loss is the same. What changes is to whose decision it is attributed, and the attribution is made after the loss. And the last sentence quoted states outcome bias as plainly as any in the chapter: the outcome was known, the guilt was not, and the cry came from the first.
5.3The man who said to wait
In the same debate Mackay reports a different voice:
If the city of London were on fire, all wise men would aid in extinguishing the flames, and preventing the spread of the conflagration, before they inquired after the incendiaries.
The speech ends: "It was time enough to punish the assassin afterwards." Mackay calls Walpole "more moderate". The advice is about sequence, repair first and judge later; it separates two acts the cry for punishment had joined, and puts time between the outcome and the verdict. The House, Mackay says, nonetheless amended its address to declare a determination "not only to seek a remedy for the national distresses, but to punish the authors of them", naming authors before the inquiry had begun.
5.4The books that could not be read
The inquiry, when it came, tried to do what the first position in the literature recommends: reconstruct what had been done from the records of the time. Mackay's account of the committee's first report describes what it found:
They stated that their inquiry had been attended with numerous difficulties and embarrassments; every one they had examined had endeavoured, as far as in him lay, to defeat the ends of justice. In some of the books produced before them, false and fictitious entries had been made; in others, there were entries of money with blanks for the name of the stockholders. There were frequent erasures and alterations, and in some of the books leaves were torn out. They also found that some books of great importance had been destroyed altogether, and that some had been taken away or secreted.
The passage describes a record made before the outcome and rewritten after it. Whatever the books had said when written, they no longer said it when the committee read them. This is the thread insight of WSTiger's records turned from memory to paper: without a recorded reason, the insight says, "memory and evaluation rewrite the reason to fit the outcome"; the committee found that a recorded reason can be rewritten too, if its keepers fear what it shows. The treasurer, Mackay says, had "packed up his books and documents" and fled, and at the end of the committee's reports:
At the end of the last, the committee declared, that the absence of Knight, who had been principally entrusted, prevented them from carrying on their inquiries.
Reconstruction from the material of the time requires the material. Where it is gone, the judges have only the outcome and the testimony of people who know it.
The testimony had its own problem. Mackay reports the examination of the company's chairman before the Lords:
He said he had been examined already by a committee of the House of Commons, and as he did not remember his answers, and might contradict himself, he refused to answer before another tribunal. This declaration, in itself an indirect proof of guilt, occasioned some commotion in the House.
The chairman's reason for silence is that he cannot trust his memory of his own earlier account. It may have been an evasion. Taken at its word, it states the thread insight's problem: an account given from memory cannot be repeated without risk of becoming a different account. Mackay's reading, that the refusal proves guilt, is itself made from the outcome; without the collapse there would have been no tribunal and no inference from silence.
5.5Two tellings of one detail
Mackay's chapter contains a passage on the directors' manners that sets up the most instructive comparison in the text:
The haughtiness of some of these "cyphering cits," as they were termed by Sir Richard Steele, was remembered against them in the day of their adversity. In the parliamentary inquiry, many of the directors suffered more for their insolence than for their peculation. One of them, who, in the full-blown pride of an ignorant rich man, had said that he would feed his horse upon gold, was reduced almost to bread and water for himself; every haughty look, every overbearing speech, was set down, and repaid them a hundredfold in poverty and humiliation.
Mackay tells this as just. The words "suffered more for their insolence than for their peculation" admit that punishment was not proportioned to wrongdoing, but in the tone of a moral, not a complaint.
Some pages later Mackay quotes Edward Gibbon's account of the same proceedings, introducing it with care:
He owns that he is not an unprejudiced witness; but, as all the writers from which it is possible to extract any notice of the proceedings of these disastrous years were prejudiced on the other side, the statements of the great historian become of additional value.
Every surviving account, on Mackay's own admission, was written by someone with a stake in the outcome; Gibbon's is admitted to restore a balance, not because it is neutral. It begins with a disclaimer of competence to judge:
Of the use or abuse of the South-Sea scheme, of the guilt or innocence of my grandfather and his brother directors, I am neither a competent nor a disinterested judge. Yet the equity of modern times must condemn the violent and arbitrary proceedings, which would have disgraced the cause of justice, and rendered injustice still more odious. No sooner had the nation awakened from its golden dream, than a popular and even a parliamentary clamour demanded its victims; but it was acknowledged on all sides, that the directors, however guilty, could not be touched by any known laws of the land. The intemperate notions of Lord Molesworth were not literally acted on; but a bill of pains and penalties was introduced--a retro-active statute, to punish the offences which did not exist at the time they were committed.
Gibbon's "retro-active statute, to punish the offences which did not exist at the time they were committed" is a legal description of outcome bias: the acts were judged by a standard made after the outcome, because the standard in force at the time did not reach them. Gibbon does not say his grandfather was innocent; he condemns the procedure. He goes on:
A vague report that a director had formerly been concerned in another project, by which some unknown persons had lost their money, was admitted as a proof of his actual guilt. One man was ruined because he had dropped a foolish speech, that his horses should feed upon gold; another, because he was grown so proud, that one day, at the Treasury, he had refused a civil answer to persons much above him. All were condemned, absent and unheard, in arbitrary fines and forfeitures, which swept away the greatest part of their substance.
The horse fed on gold appears in both passages. In Mackay's telling it marks "the full-blown pride of an ignorant rich man", justly "repaid". In Gibbon's it is a "foolish speech" for which a man "was ruined". The tellings disagree about whether a judgment of conduct may take in things other than the conduct.
Baron and Hershey (1988) hold that the outcome colours the judgment of the decision. Gibbon's account shows a further step, which is this article's reading and not theirs: the outcome licensed the judges to weigh everything about the men, their pride, past projects and manners, as evidence about their decisions, so that a "vague report" became "proof of his actual guilt". Mackay prints both passages without taking that step himself, keeping his verdict and the dissent side by side, in different voices though not, as the voyage record asks, in different times.
Gibbon also appeals to the one kind of evidence that resists rewriting: "his books exhibited the proof that before his acceptance of that fatal office, he had acquired an independent fortune of 60,000l." The figure is Gibbon's as Mackay prints it, and nothing rests on it. Where the company's books had been altered, a director's own books, kept before the event, are offered as proof of what was true before.
5.6The record: a post-mortem with almost nothing before it
WSTiger's record Post-mortem after loss sets a scene in which the books are not torn but empty. The desk, the trader and the loss are synthetic, dated 2026 by the record, and stand for no real firm or trade.
A fictional desk reviews a trade that suffered a large loss and concludes that the signal was clear at the time. The pre-trade record leaves almost no trace of the basis for the judgment or the counter-basis.
The desk's conclusion, "that the signal was clear at the time", is the kind Mackay draws about Walpole's speech and Broderick about his own maxim: a statement about the past made from after the outcome. The second sentence names what is missing: "the basis for the judgment" and also "the counter-basis", the reasons against. Without the second, a reviewer cannot tell whether the signal now called clear was seen and discounted, or not seen at all.
The question gives three courses:
Should the trader be held accountable according to the report's conclusion, should the decision be reconstructed using only the material available at the time, or should recording before the decision be mandated in the future?
The first course is the cry for punishment before guilt was known. The second is what the committee attempted with the company's books, and the state of the books defeated. The third looks forward: a rule for next time.
The example judgment states the separation:
This is an example that separates the clarity that follows a result from the uncertainty at the time of the decision. It is separately reviewed whether the same conclusion emerges using only the material available before the decision time.
The record's phrase "the clarity that follows a result" is a plain description of creeping determinism. The second sentence proposes a test: take only the material from before the decision and see whether it yields the review's conclusion. It is the test the committee could not apply to the company, and it depends on the material existing. The scenario has said that the pre-trade record "leaves almost no trace"; whatever else survives, the trader's reasons did not.
5.7What the case adds
Mackay's chapter shows outcome bias in a public reckoning: punishment demanded before guilt was known, a statute written after the acts it punished, judges who took in pride and reputation as evidence. It also shows why the remedy is hard to apply: books falsified and torn, their keeper fled, a chairman who would not repeat an account he could not remember. For the debate between the first and third positions, the case adds two things. Reconstruction from the material of the time works only where the material survives unaltered. And a record made before the decision can itself be rewritten after it, a stronger doubt than Power's or Clarke's notes state. The synthetic post-mortem record names the clarity that follows a result and proposes a test against it; its own scene leaves the test little to work on.