Tuesday, March 24, 2009

Child psychology

A different take on the roots of the financial crisis from Peter Totterdell, of Sheffield Uni's Institute of Work Psychology, who's profiled in today's Education Guardian:

Look at the causes of the credit crunch and you can see clear evidence of what happens when emotion regulation goes wrong, says Totterdell.
"In the financial sector, you've got a situation where people were on an upward spiral," he says. "They are being successful in their speculations. This fuels them into feeling good. They want to maintain that feeling, so they do more of it. They start to ignore the risks, or package up the risks, or push the risks on to somebody else, and there is nothing to stop them. In fact, they are encouraged to do it by the others around them."
He is struck by the similarities between what has happened recently to the banking system and two areas of the research programme. One is mood disorders, such as bipolar disorder, "when people go on these upward spirals and sometimes they think they're invincible, that nothing they can do is wrong, everyone around them is wrong, and their mood spirals upwards, they start taking much greater risks". The other is children, and the way that when they get overexcited, parents have to step in to calm them down, or remind them that if they persist it will end in tears.

Although he's coming at it from a different angle, it's not far from some areas of behavioural economics.


Wednesday, March 18, 2009

Economics 2.0

I've just been reading (courtesy of a review copy from Palgrave Macmillan) Economics 2.0: what the best minds in economics can teach you about business and life. Written by Norbert Häring and Olaf Storbeck, both economics journalists on the German Handelsblatt newspaper, and elegantly translated by Jutta Scherer, it's a very accessible scamper over some popular areas of economic study - education and employment, stock market success, the roots of the credit crunch, CEO and sports star pay, things like that.

It's undoubtedly part of that post-Freakonomics wave of pop economics books, but it's one of the better ones. It's very clearly written and translated, albeit with the occasional literal. The European origin offers up a few less familiar subjects and perspectives, and the authors also seem refreshingly free of the ideological bent apparent in some such similar books. Indeed, the authors spend the final chapter offering warnings about the effects of political prejudice (and other hazards) among professional economists.

It does take a rather scattergun approach, but the main theme is research which helps close that often overwhelming gap between economic theory and reality. Much of the work is drawn from experimental and behavioural studies, and much of it is very recent though there are some interesting historical cases. References are given after each chapter, though these are not comprehensive - to take a glaring example, Ferguson and Voth's fascinating Betting on Hitler (Quarterly Journal of Economics 2008 - pre-press pdf here) is discussed over several pages in chapter 13, but doesn't appear in the references.

The book gives a very good overview of a lot of interesting work, and should be of interest to economic novices and experts alike. The breadth of the topics means that even the most experienced professionals are likely to find something they didn't know as well as plenty of ammunition for arguments. The less experienced should get a good sense of what economics is really about and why, despite the conspicuous failures of models and ideologies in recent times, the subject is still relevant.

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Tuesday, March 03, 2009

And back

Harbour (by tim2ubh)
I'm back from the visit to San Diego, more or less refreshed after another temporally disorienting brace of flights (left the hotel 4am Sunday, home at 8am Monday). A very worthwhile and enjoyable trip, though, meeting everyone from the Mayor to a bunch of dudes making environmentally-friendly surfboards (possibly the most Californian business imaginable). I'll be doing a full write-up for Cleantech Magazine. There's more pics from the trip on my Flickr stream.

In the meanwhile, Cleantech's latest Infocus publication features another article by myself on venture capital investment in smart grid companies, an area that was high on the agenda in San Diego where the local utility is gearing up to install some 1.4 million smart meters in homes. Also due out is the latest annual review from Private Equity International with my review of the European mid-market; and, next week, another technology focus section for Crain's Manchester Business, looking at smart tech investment in a downturn and also featuring an unexpected bit of Hollywood glamour.

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