Financial markets seem to create difficulties with resource allocation (the size of the financial sector and talent drawn into it as well as the consequences of short-termism); savings (inter-temporal volatility and declining rates of return and pension fund performance); the wider economy (spectacularly in 2008); and democratic equity (the ability of the financial sector to use its redistributed wealth to exert oligarchic political influence). “Emotional finance” creates a new theoretical approach to the economics of financial markets, based on interdisciplinary insights. It recovers and builds on the “forgotten” or “ignored” insights of Keynes, Minsky, Shackle, and Simon, as well as the more recent work on information asymmetry by Akerlof, Stiglitz, and others.
Developing a Case for Emotional Finance
This research project explores ways to influence policy, starting with selected UK regulators, pension funds, and asset management groups, by testing the feasibility of “emotional finance” solutions to the prevention of future financial crises.