Thursday, 18 June 2009

Behavioural economics links

A very good article from Matt Grist, countering the argument that all choices arise from a priori objective preferences, pointing out that choice in itself can shape behavioural capabilities.

Chris Dillow asks: Is behavioural economics wrong? (the answer is no but that's a subject for another posting)

A funny post from missmarketcrash about gambling, gold, smoking and rats.

And the odd link out: Justin Fox's article summarising his new book The Myth Of The Rational Market discusses the history of the idea of market (ir)rationality without once mentioning behavioural economics. Still, the following line made me think:
"Joseph Stiglitz showed that a perfectly efficient market was impossible, because in such a market, nobody would have any incentive to gather the information needed to make markets efficient"
While that's true in principle, it should not be hard to incorporate the cost of information gathering into a market model: then those who have a comparative advantage at gathering information will still have an incentive to do it, and those who do not have that advantage will pay for it through small mispricings of stocks. So while information costs are clearly a reason why markets are not perfectly efficient, I suspect there is more to it than that.

1 comment:

PunditusMaximus said...

Information can be very, very expensive. Look at how much money Senator Clinton spent to find out that she wasn't going to be President.