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HOW BUBBLES FORM ACCORDING TO SCIENCE

September 20, 2008

Timely revisit into economic dogmas and how financial bubbles form leading to eventual destructive crashes: hidden causes of bubbles and crashes according to science.

“In standard economic theory, the way that prices in all markets are meant to be set depends on people being rational and having access to all available information,” says David Tuckett of the Psychoanalysis Unit at University College London.

“This way of looking at things is almost completely wrong,” he said. “Markets are operated by human beings.”

Investigators into the theories of behavioural or emotional finance say conscious decisions are only the surface of a river with deep and powerful undercurrents.

Read more.

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