In the 5 October 2009 issue of The New Yorker, John Cassidy gives in Rational Irrationality-The real reason that capitalism is so crash-prone a nice behavioral finance analysis of what went wrong with our financial system.
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This is an incredibly great analysis of the way that bubbles get created.
Use the search box on this blog to search for “bubble”.
One of the items you will find is a post of September 16, 2008 titled McCain Just Doesn’t Understand Economics.
In that post, I explain some of the behavior that is explained in this post, Rational Irrationality-The real reason that capitalism is so crash-prone.
Regarding the opening scenario in the New Yorker article, every person who has taken basic training in the U.S. Army knows about the oscillations of foot bridges when crossed by a number of people walking in unison. It is standard operating procedure to break ranks when crossing such a bridge to avoid those oscillations.