tag:blogger.com,1999:blog-22093933.post7122659726821059373..comments2024-03-28T00:14:10.957-05:00Comments on Deric's MindBlog: Why our brains go for market bubbles.Deric Bowndshttp://www.blogger.com/profile/16617204535017208765noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-22093933.post-50185409130167210782010-11-23T13:07:53.500-06:002010-11-23T13:07:53.500-06:00Anonymous, you begin by stating "There are ma...Anonymous, you begin by stating "There are many possible explanations for market bubbles." Then go on to state that "Dopamine and Testosterone explanations have no real place." because they are "at the wrong level".<br /><br />The explanations aren't mutually exclusive regardless the perceived "level". That you would suggest our neurons play no role in market behavior is, as you put it, utter nonsense.josephmartinshttp://www.datamobilitygroup.com/saltworksnoreply@blogger.comtag:blogger.com,1999:blog-22093933.post-43951608111654041112010-11-06T14:30:24.560-05:002010-11-06T14:30:24.560-05:00Utter nonsense. To invoke neuro-based arguments t...Utter nonsense. To invoke neuro-based arguments to explain market bubbles suggests that the writer receives a dopamine reward for intellectual masturbation. <br /><br />There are many possible explanations for market bubbles. The challenge for the serious thinker is to appropriately frame the problem. <br /><br />One could frame the problem in game theoretic terms. For example we have a tragedy of the commons problem a kin to fishing. IF we all continue to fish we will exhaust the stock of fish and all starve. If any one elects to stop fishing they starve. Coordination is needed to resolve the matter. Thus in the market bubble situation we can stop playing and deliver inferior returns immediately or trade until we all lose. Losing later is preferable to most humans. <br /><br />Please note there is no irrational behavior to explain. Dopamines may be in force across all players but it is not predictive. <br /><br />Cooperation is necessary to modify the rules of the game. Given that players are strictly forbidden to cooperate by law we have a problem where the game as regulated creates the outcome. We now have an explanation that the market failed not do player actions but regulator actions. The recent economics winner (2009) offers interesting approaches to dealing with this type of problem.<br /><br />Dopamine and Testosterone explanations have no real place. They are at the wrong level. Rules not player psychology is the issue. <br /><br />While this is but one possible explanation. It appears far more likely given the levels issue. I suggest that we do not see the world through our pet theory, rather look at what really is happening.Anonymousnoreply@blogger.com