Economics and the brain: how people really make decisions in turbulent times. In a 2008 paper on neuroeconomics, Carnegie Mellon University economist George Loewenstein said: “Whereas psychologists tend to view humans as fallible and sometime even self-destructive, economists tend to view people as efficient maximisers of self-interest who make mistakes only when imperfectly informed about the consequences of their actions.”
This view of humans as completely rational - and the market as eminently efficient - is relatively recent. In 1922, in the Journal of Political Economy, Rexford G. Tugwell, said (to paraphrase) that a mind evolved to function best in “the exhilarations and the fatigues of the hunt, the primitive warfare and in the precarious life of nomadism”, had been strangely and quickly transported into a different milieu, without much time to modify the equipment of the old life. Regardless of what is happening in Greece or Spain, or Yemen, we think about our situation, first and foremost. Risk as feelings: how our brain makes decisions.
Blood & Gore’s Manifesto For Sustainable Capitalism - must read (and chew:) Where Are My Taxes? Society: Governments must tackle record gap between rich and poor, says OECD. 05/12/2011 - The gap between rich and poor in OECD countries has reached its highest level for over over 30 years, and governments must act quickly to tackle inequality, according to a new OECD report.
“Divided We Stand: Why Inequality Keeps Rising” finds that the average income of the richest 10% is now about nine times that of the poorest 10 % across the OECD. The income gap has risen even in traditionally egalitarian countries, such as Germany, Denmark and Sweden, from 5 to 1 in the 1980s to 6 to 1 today. The gap is 10 to 1 in Italy, Japan, Korea and the United Kingdom, and higher still, at 14 to 1 in Israel, Turkey and the United States. In Chile and Mexico, the incomes of the richest are still more than 25 times those of the poorest, the highest in the OECD, but have finally started dropping. Income inequality is much higher in some major emerging economies outside the OECD area.
>> Download the underlying data in Excel Another factor has been a cut in top tax rates for high-earners. Gapminder: Unveiling the beauty of statistics for a fact based world view. The world as you've never seen it before. The 1% are the very best destroyers of wealth the world has ever seen. If wealth was the inevitable result of hard work and enterprise, every woman in Africa would be a millionaire.
The claims that the ultra-rich 1% make for themselves – that they are possessed of unique intelligence or creativity or drive – are examples of the self-attribution fallacy. This means crediting yourself with outcomes for which you weren't responsible. Many of those who are rich today got there because they were able to capture certain jobs. This capture owes less to talent and intelligence than to a combination of the ruthless exploitation of others and accidents of birth, as such jobs are taken disproportionately by people born in certain places and into certain classes. The findings of the psychologist Daniel Kahneman, winner of a Nobel economics prize, are devastating to the beliefs that financial high-fliers entertain about themselves. Such results have been widely replicated. So much for the financial sector and its super-educated analysts. This is now changing. Galbraith: why economists won't discuss fraud. A startling quote from James K.
Galbraith: "you cannot get – not at a meeting sponsored by the International Monetary Fund, not from the participants at the Institute for New Economic Thinking – is any serious discussion of contract law and fraud. I’ve tried, repeatedly. No one will deny, in response to the question, the role that fraud played in the financial debacle. How could they? He explores why, looking at this in a Keynesian framework.
And he has some frightening things to say, along the way: "The corruption and collapse of the rule of law, in the financial sphere, is basically irreparable. " or "we are at the end of the illusion of a market place in the financial sphere. " and "what we’re dealing with here and what we need to recognize is not an interruption to a long process of economic growth, a recession or some shock to aggregate demand. Strong stuff. Quite so.