Minding the Markets: An Emotional Finance View of Financial Instability

The financial crisis of 2008 clarified what economic theories have long ignored. Emotions really matter. David Tuckett argues that economists' explanations for what happened in the Financial Crisis miss its essence. They ignore deep flaws in the organisation of financial markets which, as they have hitherto evolved, been managed, and been understood, have ignored critical components of human psychology. This groundbreaking book offers timely ideas about how emotion can be systematically incorporated into theories about financial markets and how to use understanding to create policy to make them safer. The argument, based on research interviewers with money managers, is that the crisis resulted from failures to understand and organise markets so that they control the human behaviour they unleash. Financial assets have an intrinsically uncertain value and so a particular ability to provoke exciting and then frightening stories and to create what the author terms 'divided' mental states and 'groupfeel'. Supporting such ideas with interdisciplinary evidence and insights he sets out a framework for a new economic theory of financial markets.

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