Magical thinking is a psychological term for making a naive assumption of cause and effect without consideration of intervening mechanisms. In plain English, it is the assumption that if I do THIS, then THAT will happen even though I have no idea how or why. Prominent examples of magical thinking can be found in Economics (if we cut taxes on the Corporations, they will invest more money in upgrading their production facilities and create more jobs) and Politics. It is typical of the world-view of very young children, who have a somewhat simplistic model of How-Things-Work.
To many outsiders, most Magick seems to be built on this basis...some guy mutters some weird words and waves his hands and expects to get a lot of money soon (sounds like a Management Consultant, come to think of it), or to make it rain, or to be rid of an enemy. Then they shake their heads, call the Magick-users children or worse, and go on with their lives.
Within real Magick-use, this sort of sloppy thinking can lead to anything from disappointing 'fizzles' to disastrous misfires of spells. Our cultural heritage's are filled with "monkey's paw" type stories of the results of ill-thought-out Magick use. While dilettante New Agers are more likely to blindly 'cookbook' a spell or ritual, some of us have been known to skip a few steps in the process as well.
Just think of the consequences of invoking Diana or Aphrodite in a ritual designed to "keep those foolish women in their place." (Anyone remember "Good-bye, Charlie"?)
While I am not saying that you need to understand the physics/chemistry/etc. of each step down to the subatomic level, I am suggesting that you think through each step and each mechanism (and likely consequences) of any major working BEFORE you perform it. A black-box understanding (detailed knowledge of the inputs and outputs of a mechanism and the relationship between them without an understanding of the internal details of the mechanism) is usually enough for mot purposes. For instance, if invoking or evoking a deity, make sure you know the strengths, weaknesses, character, and personality of that deity. If using herbs (ingested or in balms or incense) be sure you know the pharmacological and combination effects of each. Most of all, when going for a long-term effect think of the ecology of that effect: where it can come from and what it may cause later. You can't always anticipate all side effects, and you certainly can't always avoid them, but with a bit of work you can give yourself a shot at handling them.
Do a reality check before you start a working. If you just pay attention to the beginning (the ritual or working) and the end (the desired effect) and leave the rest to wishful thinking, you are asking for trouble.
NOTE: The above is an excerpt of a 1988 seminar on Magick and Psychology: Insights and Interactions.
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