I have been acquainted with the work of Richard Thaler, an expert in behaviorial finance, for many years. Market participants have always recognised the importance of psychology in moving stock and bond prices, but Thaler’s two books “The Winner’s Curse” and “Quasi-Rational Economics” put some theoretical underpinning behind these concepts. A recent book co-authored by Thaler called “Nudge: Improving Decisions on Health, Wealth and Happiness” broadened the application of his research into behavioral psychology to every aspect of human decision-making, not just those related to the markets. The book is well worth a read, but what is even more fascinating is that the British coalition government—not noted for its creative policy making—has actually set up a unit to implement the ideas contained in “Nudge”. The Telegraph has a wonderful article detailing the unit’s work and achievements.
Recently came across an important book by Kari Marie Norgaard called “Living in Denial: Climate Change, Emotions and Everyday Life”. Norgaard delves deep into themes that I have posted on before in connection with George Marshall’s blog. You can find links to Norgaard’s climate change related work here and such acute observations as this: “….people actually work to avoid acknowledging disturbing information in order to avoid emotions of fear, guilt, and helplessness, follow cultural norms, and maintain positive conceptions of individual and national identity. As a result of this kind of denial, people describe a sense of ‘knowing and not knowing’ about climate change, of having information but not thinking about it in their everyday lives.”
The Economist has an interesting article on social networks that includes work conducted by Boleslaw Szymanski of the Rensselaer Polytechnic Institute in New York. A previous paper by Szymanski and colleagues suggest that if a committed minority can reach 10% of the population, general opinion will ‘tip’ to align itself with that minatory, the suffragette and civil rights movements being classic examples. This provides some hope that if organisations such as 350.org reach sufficient momentum then their thinking can become the new norm.
Ugo Bardi’s blog Cassandra’s Legacy takes a look at network politics in the wake of the Italian electoral results. The combination of a move toward post-growth economies in the OECD plus the network capabilities of the new media appears to be tearing up the political map. We live in interesting, if somewhat scary, times.
In a similar vein, BBC Radio 4’s programme Analysis looks at how the vulgar Keynesian attitudes of the left are being challenged by political philosophers who argue that it is time to move on to some 21st style thinking. Podcast is here.