Forsaken Liberty, A Behavioral Legacy?

Nudged to Conservatism

One of the recurring themes we keep hitting here is the balance between freedom and behavioral intervention.  Nudge theories, for instance, assume that pushing people in a direction that’s good for them is an unadulterated benefit to humankind.  Yet history suggests that this kind of paternalism is a gateway to much more serious interventions, when governments decide that they know best for us.

In general economists, you’d think, would be soundly against such interventions.  After all, what is the point of studying free markets if you don’t think free markets should be the preferred operating mode for people?  Yet an underlying assumption of liberty seems to lull even these arch adherents of market forces into a preference for conservatism.

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Investor Decisions – Experience I­­s Still Not Enough (But It Helps A Bit)

Weaselly Satisified

The idea that personal experience isn’t enough to help investors make better decisions is one we’ve investigated before; particularly in Investors Decisions - Experience Is Not Enough.  The general idea is that our personal observations don’t generalize, because market behavior is continually adapting under evolutionary pressure.

Now recent research confirms this, up to a point.  Which is a weasel-worded way of trying to convey the idea that I wasn’t exactly right but don’t want to admit it.  Before we get all excited, however, the general idea still applies: experience helps, but only up to a point.  And the point is very, very sharp and very, very expensive.

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Bad Press: The Sad Demise of Financial Journalism

Free Speech

The press have always had a key role to play in the maintenance of democracy.  They have free speech rights which are protected by the courts - in particular they have the right to protect their sources – which other people aren’t afforded.  However, there’s a view that this power brings responsibility, and that responsibility is to hold the rich and the powerful to account.

Yet financial journalists have, with a few exceptions, been conspicuous by their absence when the great financial scandals of the twenty first century have unfolded.  Indeed they’ve often been implicated in the issues, egging on investors with hyped up stories of superpowered CEOs and overly optimistic forecasts.  And, frankly, if financial journalists aren’t able or willing to exercise their duties, should we continue to allow them the rights to do so?

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The Zeitgeist Investor: Wheels, Arrows and Buggy-Whips

This is an additional chapter to The Zeitgeist Investor, available at a good eBookshop near you.

So, although we’ve seen the effect of cycles on markets and on investor behaviour, and of investor behaviour on markets and cycles, it isn’t truly clear that those cycles are really cyclical.  If you look at a long-term chart of any major market then you don’t see an up and down wavy pattern but a more or less continuous upward trend.  This looks less like a sine wave and more like time’s arrow.

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A Psy-Fi Blog E-Book: The Zeitgeist Investor

I’m delighted to announce that PSB’s first e-book has just gone live on Amazon.  The Zeitgeist Investor is a time-bending canter through financial history, examining how different eras evoke similar, and some not-so-similar, responses from over-excitable, under-prepared and behaviourally challenged investors.  It also spends an inordinate amount of time being rude about various financial innovations which were supposed to make things better but, in fact … didn’t.

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