Tag Archives: economics

Behavioral Finance 101

Great, short article on Slate by Henry Blodget about the mistakes we make when investing – which really applies to many other areas of life: Born Suckers – The greatest Wall Street danger of all: you. By Henry Blodget

Most interestingly, the Prospect Theory concept applies to many other aspects of behavior, including foraging theory and when mixed with the Confirmatory Bias, can lead to numerous costly mistakes.

Much of this work reflects recent Nobel laureate Daniel Kahneman’s work (along with Amos Tversky, but Nobels aren’t awarded posthumously) .

Other notable, perhaps more readable interpretations are in Thomas Gilovich’s excellent books Why Smart People Make Big Money Mistakes And How To Correct Them: Lessons From The New Science Of Behavioral Economics and How We Know What Isn’t So.