I recently watched a NOVA special entitled “Mind Over Money.” I thought it was pretty good. It discussed the two leading and opposing theories regarding markets and economic behavior. On one side there are the rational, self-interested market participants. These types were first defined by Mr. Invisible Hand himself, Adam Smith. On the other side are the behaviorists. The behavioral school of economic thought predominantly concerns itself with the idiotic decisions and non-understandable side of irrational human beings making decisions. The argument basically boils down to whether we are smart and rational people, making sound economic decisions, or that we are idiots and irrational, who make stupid decisions based on our thoughts and feelings, etc.
The show touched upon efficient markets, with Mr. Eugene Fama leading the charge for the smart and rational people creating efficient markets. Got May 6, 2010? Mr. Robert Shiller, aka. Mr. Irrational Exuberance, led the charge for those on the behavioral side. “By the way Robert, got a house to buy or sell?
It was worth watching for an hour, I especially enjoyed the bidding for a $20 bill that some fool was willing to pay $27 to 28 for…genius…maybe Mr. Shiller would like to sell his home to that guy…everyone knows that home prices never go down…
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