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An aquarium is man made as are financial markets. They work only if designed correctly in the first place. Logical vs Rational - whats the difference? When behavioral economists refer to an illogical/irrational behavior it is with reference to utility theory So whenever a free agent pays for a good or service in full knowledge that the expected utility
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The science of Behavioral economics is comparatively new and all the causality is not fully understood. It would be also presumptuous to think that new biases are as yet not undiscovered. You are right there is nothing to prevent another competitor from manipulating the same physiological phenomenon to their advantage - thats the whole point. Your Wax
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A great example is 'Anchoring" http://priceless-the-book.blogspot.co.uk/2009/10/10-for-10.html Humans use a memory process called 'chunking' to save space and group items together, so often reference unlinked numbers as related supermarkets know this fact and look for any opportunity to put large numbers in your eye line. 1000 points
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True I am not stating that humans are not motivated by self interest. I wouldn't want to over simplify the findings of indepth studies into complex pysche of human decision making into a one line example. I'm talking about the many cognitive biases such as loss aversion, endowment & framing effects. But really there are too many list : http
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well no. Accepting that humans are not mathatically rational is an important step in understanding why free markets are so volatile.
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Well okay then.. I'm going to call it. Quantitative easing is now the primary method of monetary policy Which means countries will be borrowing less money (good) But printing it directly (bad) I am just trying to work out if am going to be any better or worse of? I think the total effect on the money supply will be more or less the same but with
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Agree with them probably but I don't know about Jim Crow history The 'invisible hand' is often misunderstood in the self regulation of markets in its effect on the relationship of supply & demand. However Modern day behavioral economists sucha as Amos Tversky have disproved a direct link (humans are not mathematically rational agents
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One Datapoint? Admitly Richard Werner only defined the term in 2008 http://en.wikipedia.org/wiki/Richard_Werner But the Japaneese have been succesfully undertaking QE for the last ten years or more. The US has now had three rounds of QE, not including 'operation twist' The UK multiple different rounds totaling £200 billion The ECB also
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For a while Ive been trying to workout the effective difference between increasing quantitate easing and increasing interest rates. QE increase = buying bonds with newly created money Interrest rate increase = buying bonds with previously borrowed money Personally I've never understood why anyone would want to buy government bonds. Giving a loan
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Well if banks are willing to pay me 9% in return for a loan of paper money.. why the hell would I want to get all dirty down a gold mine? Plus I can always reduce the repayment costs by printing more money - is this a serious question?