Wednesday, April 28, 2010
‘Mind over Money’
WGBH’s Nova had a terrific show last night on how human emotions may influence all financial transactions -- whether buying a product when you’re sad or trading stocks amid market exuberance. Ultimately, it was a little depressing for two reasons: 1.) No amount of regulations can prevent another financial bubble, as long as humans are humans. 2.) There are still many people who believe markets are perfectly rational and need no regulation. … The most convincing part of ‘Mind over Money’ came when a University of Chicago instructor led students through a simple auction of U of C thermal coffee mugs. They were asked to put a value on the items. The average value: $6. A few minutes later, the ‘buyers’ were asked to put a resale price on their coffee mugs. The average asking price: $9. They had already become sentimentally attached to the mugs and their competitive instincts were up. So much for all the Harvard and MIT math whizzes trying to develop fancy algorithms to predict market forces.
WGBH’s Nova had a terrific show last night on how human emotions may influence all financial transactions -- whether buying a product when you’re sad or trading stocks amid market exuberance. Ultimately, it was a little depressing for two reasons: 1.) No amount of regulations can prevent another financial bubble, as long as humans are humans. 2.) There are still many people who believe markets are perfectly rational and need no regulation. … The most convincing part of ‘Mind over Money’ came when a University of Chicago instructor led students through a simple auction of U of C thermal coffee mugs. They were asked to put a value on the items. The average value: $6. A few minutes later, the ‘buyers’ were asked to put a resale price on their coffee mugs. The average asking price: $9. They had already become sentimentally attached to the mugs and their competitive instincts were up. So much for all the Harvard and MIT math whizzes trying to develop fancy algorithms to predict market forces.
