Tag Archives: Behavioral Economics
Postrel’s Corollary
One upshot of the experiments Virginia Postrel has described could be the following: the more investors believe behavioral economics to be true, the more likely bubbles will develop in markets trading in assets. As long as I’m overly confident in … Continue reading
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Not Irrational Exuberance But Irrepressible Effervescence
Meanwhile, Virginia Postrel has a fascinating article in the newest Atlantic on how bubbles develop in finance. She elucidates their nature by describing some recent findings in experimental economics. The nut: it turns out that even fully informed investors will … Continue reading
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Behavioral Economics Explains All and Saves All
So says David Leonhardt in the Times. But let’s say you work for a firm that specializes in applying the latest theories in management and organizational behavior. Idea factories, like HBS and Wharton, spew out cutting edge techniques and models, … Continue reading
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The Normative Claims of Behavioral Economics
It is often unstated, but nonetheless true, that the fundamental normative claim of behavioral economics is that people should be rational. The guiding aim of every “nudge” is to make neoclassical economics true.The behavioral economic utopia coincides with the neoclassical. Insofar … Continue reading
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To What Extent Does Behavioral Economics Explain Mania in Finance?
I say very little, but I’m willing to be convinced. One very implausible, but popular line of reasoning runs along these lines: neoclassical economics assumes every agent is rational and fully informed; the euphoria inflating the real estate bubble was … Continue reading
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