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Posts Tagged ‘neurofinance’

Paul Farrell, a long time ago

Paul Farrell, a long time ago

Reading a column by someone called Paul B. Farrell on Market Watch, a website related to the Wall Street Journal news group, I realized that what neuroeconomics is to me did not correspond to Farrell’s neuroeconomics. At all.

Farrell is mad at neuroeconomists who “promise that if investors, taxpayers and voters simply follow the advice of neuroeconomists, they’ll get rich”. Uh? Later in his column, Farrell gets frantic:

And they [neuroeconomists] are always one step ahead of you and whatever you think you get from their neuroeconomics books. They really are working for Wall Street insiders. What they’re doing is similar to DNA mapping, except the neuroeconomists use MRIs to map your irrational behavioral patterns, then, like a CIA intelligence team secretly monitoring the enemy, their quants develop algorithms that help Wall Street target the little guy with new “financial weapons of mass destruction” that manipulate financial markets.

I don’t know for you, but I don’t follow that too well. As an observer of neuroeconomics, what am I supposed to do with this kind of strange material? I think it educates me on two scores.

First, I have to get used to the rhetoric of online journalism, much more than I am now. Because it really seems that the hysterical tone of this column participates to its dissemination (the blog post I am currently writing is an evidence of it). Hence,  the column by Farrell is not a minor piece of primary material on neuroeconomics. The mere fact that his opinion is shouted is bound to give it some weight. Sad maybe, but the cold and impartial historian of neuroeconomics shall not be moved by that!  😉

Second, this column is a plea for including “pop neuroeconomics” in the scope of the study of the field. The frontiers are just too blurred, and the exchanges between “academic neuroeconomics” (practised in universities) and pop neuroeconomics (practised in consulting firms and published in self help books) are too significant to ignore. How significant exactly? This column gives a clue of it, but I should be much more precise when I will have read extensively in this literature in “neuroeconomics for brainy traders” and “neurofinance: get rich in three days”. Wish me luck.

The Millionaire Code

The Millionaire Code

Coda: a search on internet turns out this book cover. The vociferations of Farrell against the false promises that neuroeconomics would make to small traders appear in a much better perspective, now!

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Neuro-finance is now (slowly) making its way onto the economics curriculum, one instance of which is in Ireland, where Dr. Stephen Kinsella, has included a lecture on it, in his lectures on financial economics. This is probably pretty good news for the neuro-scientists out there, but will it bring new insights, or more navel gazing, to a sub-discipline already deeply involved with itself?

Lecture Note on responses to Intertemporal Choices... Pretty

Lecture Slide on responses to Intertemporal Choices... Pretty

Either way, it’s cutting edge, and it could provide some answers to the questions and (empirically tested) theories  which Kahneman and Tversky have already provided… Dr. Kinsella offers a very helpful list of extra reading and lecture notes, which discusses the neural responses to decisions about whether to take rewards now or later. It’s admittedly fascinating stuff, but I am not sure if it can add up to explanations of how and why the whole financial markets work, but that is not so much an indictment of neurofinance, but more to do with micro and macroeconomics. At least the brain scans give us something to look at.

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Here is a video interview of Peter Bossaerts, one of the foremost neuroeconomist around. He specializes in neurofinance, and in this interview he explains the basics of it to Arvetica, a Swiss consulting firm. Bossaerts is indeed based at the Swiss Finance Institute and Ecole Polytechnique Federale de Lausanne, in addition to CalTech.

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