23. Scientists including E.O. Wilson and Stephen Jay Gould, as well as the economist John Maynard Smith, focus on the role of organisms in evolution, arguing against Dawkins’ focus on genes as the vehicles for natural selection. For further reading on these debates, including economists’ insights, see also Robert Axelrod (1984), The Evolution of Cooperation, Cambridge, MA: Basic Books; Stephen Jay Gould (1992), The Panda’s Thumb: More Reflections in Natural History, New York: W.W. Norton; Stephen Jay Gould (2001), The Lying Stones of Marrakech: Penultimate Reflections in Natural History, London: Vintage; John Maynard Smith (1982), Evolution and the Theory of Games, Cambridge University Press; and John Maynard Smith (1974), ‘The Theory of Games and the Evolution of Animal Conflicts’, Journal of Theoretical Biology 47, pp. 209–21.
24. For some fascinating surveys of culture and other social behaviours in animals, see Hal Whitehead and Luke Rendell (2015), The Cultural Lives of Whales and Dolphins, University of Chicago Press; Carl Safina (2015), Beyond Words: What Animals Think and Feel, New York: John Macrae/Henry Holt and Company; and Kieran C.R. Fox, Michael Muthukrishna and Susanne Shultz (2017), ‘The Social and Cultural Roots of Whale and Dolphin Brains’, Nature Ecology and Evolution. https://www.nature.com/articles/s41559–017–0336-y (accessed 30 September 2017).
25. Davies, Krebs and West (2012), pp. 76–7.
26. Richard W. Wrangham, W.C. McGrew, Frans B.M. de Waal and Paul G. Heltne (eds) (1996), Chimpanzee Cultures, Cambridge, MA: Harvard University Press; Michael Balter (2013), ‘Strongest Evidence of Animal Culture Seen in Monkeys and Whales’, Science, 25 April. http://www.sciencemag.org/news/2013/04/strongest-evidence-animal-culture-seen-monkeys-and-whales (accessed 7 September 2017).
27. Luke Rendell and Hal Whitehead (2001), ‘Culture in Whales and Dolphins’, Behavioral and Brain Sciences 24, pp. 309–82.
28. Gene S. Helfman and Eric T. Shultz (1984), ‘Social Transmission of Behavioural Traditions in a Coral Reef Fish’, Animal Behaviour 32, pp. 379–84.
29. This idea is known as the ‘social brain hypothesis’. For a survey of the idea see Robin I.M. Dunbar (2009), ‘The Social Brain Hypothesis and Its Implications for Social Evolution’, Annals of Human Biology 36(5), pp. 562–72.
30. Harry J. Jerison (1973), Evolution of the Brain and Intelligence, New York and London: Academic Press; Paul D. MacLean (1990), The Triune Brain in Evolution: Role in Paleocerebral Functions, New York: Springer.
31. For an analysis of human cooperation from an evolutionary perspective, see David G. Rand and Martin A. Novak (2013), ‘Human Cooperation’, Trends in Cognitive Sciences 17(8), pp. 413–25.
32. Herbert Simon (1990), ‘A Mechanism for Social Selection and Successful Altruism’, Science 250, pp. 1665–8.
33. Tania Singer, Ben Seymour, John O’Doherty, Holger Kaube, Raymond J. Dolan and Chris D. Frith (2004), ‘Empathy for Pain Involves the Affective But Not Sensory Components of Pain’, Science 303(5661), pp. 1157–62. See also Patricia L. Lockwood (2016), ‘The Anatomy of Empathy: Vicarious Experience and Disorders of Social Cognition’, Behavioural Brain Research 311, pp. 255–66.
34. Tania Singer and Ernst Fehr (2005), ‘The Neuroeconomics of Mind-Reading and Empathy’, American Economic Review 95(2), pp. 340–5.
35. Una Frith and Chris Frith (2003), ‘Development and Neurophysiology of Mentalizing’, Philosophical Transactions of the Royal Society B 358(1431), pp. 459–73; Chris D. Frith and Una Frith (2006), ‘The Neural Basis of Mentalizing’, Neuron 50(4), pp. 531–4.
36. Elisabeth Hill and David F. Sally (2003), ‘Dilemmas and Bargains: Autism, Theory-of-Mind, Cooperation and Fairness’. https://ssrn.com/abstract=407040 (accessed 25 October 2017).
37. See also Alessio Aventani, Domenica Bueti, Gaspare Galati and Salvatore M. Aglioti (2005), ‘Transcranial Magnetic Stimulation Highlights the Sensorimotor Side of Empathy for Pain’, Nature Neuroscience 8(7), pp. 955–60 for transcranial magnetic stimulation (TMS) studies of empathising with others’ pain.
38. Franco Cauda, Giuliano Carlo Geminiani and Alessandro Vercelli (2014), ‘Evolutionary Appearance of Von Economo’s Neurons in the Mammalian Cerebral Cortex’, Frontiers in Human Neuroscience 8, article 104.
39. See Giacomo Rizzolatti and Laila Craighero (2004), ‘The Mirror Neuron System’, Annual Review of Neuroscience 27(1), pp. 169–92; Giacomo Rizzolatti (2005), ‘The Mirror Neuron-System and Imitation’, in Perspectives on Imitation: From Neuroscience to Social Science, vol. 1, Mechanisms of Imitation and Imitation in Animals, ed. Susan Hurley and Nick Chater, Cambridge, MA: MIT Press, pp. 55–76; Marco Iacoboni (2009), ‘Imitation, Empathy, and Mirror Neurons’, Annual Review of Psychology 60, pp. 653–70; and Marco Iacoboni, Roger P. Woods, Marcel Brass, Harold Bekkering, John C. Mazziotta and Giacomo Rizzolatti (1999), ‘Cortical Mechanisms of Human Imitation’, Science 286, pp. 2526–8. Baddeley, Curtis and Wood (2004) suggest that this mirror neuron activity may explain imitation and herding in socioeconomic contexts.
40. Rizzolatti and Craighero (2004).
41. For some general analyses of the evolution of human behaviour, see Paul Seabright (2004), The Company of Strangers: A Natural History of Economic Life, Princeton University Press. For a more historical perspective, see Yuval Noah Harari (2014), Sapiens: A Brief History of Humankind, London: Harvill Secker/Random House. See also ‘Homo sapiens’, Smithsonian National Museum of Natural History online, 29 June 2017. http://humanorigins.si.edu/evidence/human-fossils/species/homo-sapiens (accessed 7 September 2017).
42. See, for example, Elaine Hatfield, John T. Cacioppo and Richard L. Rapson (1994), Emotional Contagion, Cambridge University Press.
43. Raafat, Chater and Frith (2009).
44. Cohen (2005).
5 Mavericks
1. Christopher Turner (2011), ‘Wilhelm Reich: The Man Who Invented Free Love’, Guardian, 8 July. https://www.theguardian.com/books/2011/jul/08/wilhelm-reich-free-love-orgasmatron (accessed 7 September 2017).
2. Upasana Chauhan (2016), ‘Why I Risked an Honor Killing to Reject an Arranged Marriage’, TIME. http://time.com/4450544/arranged-marriage-india/ (accessed 30 September 2017).
3. For a survey on the literatures covering the negative impacts, see Kipling D. Williams, Joseph P. Forgas, Willian von Hippel and Lisa Zadro (eds) (2005), The Social Outcast: Ostracism, Social Exclusion, Rejection, and Bullying, The Sydney Symposium of Social Psychology series, New York/Hove: Psychology Press/Taylor & Francis Group.
4. Keynes (1936), p. xxiii.
5. W. Heath Robinson (2007), Contraptions, London: Duckworth; ‘William Heath Robinson’, Heath Robinson Museum online. https://www.heathrobinsonmuseum.org/williamheathrobinson (accessed 7 September 2017).
6. The William Heath Robinson Museum in London is a monument to his whimsical contributions. See Olivia Solon (2016), ‘William Heath Robinson Museum Finally Opens This Weekend. Who is the Man Behind the Legend?’, Wired, 13 October. http://www.wired.co.uk/article/heath-robinson-deserves-a-museum (accessed 7 September 2017).
7. David Hirshleifer and Robert Noah (1998), ‘Misfits and Social Progress’, in Robert Noah (1998), Essays in Learning and the Revelation of Private Information, PhD thesis, University of Michigan, ProQuest Dissertations Publishing.
8. Hirshleifer and Noah (1998).
9. See for example Chunpeng Yang (2011), ‘Maverick Risk of Individuals’ Risk Perceptions’, Journal of Systems Science and Information 9(2), pp. 119–26. We will explore the issue of maverick risk in more detail in chapter 6.
10. Bernheim (1994).
11. The seminal text for expected utility theory is John von Neumann and Oskar Morgenstern (1944), Theory of Games and Economic Behavior, Princeton University Press.
12. ‘Sticky Lawsuit: $400M Dispute Lingers Over Post-It Inventor’, Chicago Tribune, 11 March 2016. http://www.chicagotribune.com/business/ct-post-it-note-inventor-lawsuit-20160311-story.html (accessed 7 September 2017).
13. Daniel Kahneman and Amos Tversky (1979), ‘Prospect Theory: An Analysis of Dec
ision under Risk’, Econometrica 47(2), pp. 263–92.
14. See Amos Tversky and Daniel Kahneman (1974), ‘Judgement under Uncertainty: Heuristics and Bias’, Science 185(4157), pp. 1124–31. Also see the collected volumes Daniel Kahneman, Paul Slovic and Amos Tversky (eds) (1982), Judgement under Uncertainty: Heuristics and Biases, Cambridge University Press, and Daniel Kahneman and Amos Tversky (eds) (2000), Choices, Values and Frames, Cambridge University Press.
15. Kahneman and Tversky (1979).
16. For a technical analysis of these different hypotheses in the context of herding and contrarianism in financial markets, see Chad Kendall (2017), ‘Herding and Contrarianism: A Matter of Preference’, paper presented to the Financial Management Association Conference, Boston, MA, July. http://www.fmaconferences.org/Boston/kendall-ptherding.pdf (accessed 14 September 2017).
17. John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian and Katherine L. Milkman (2015), ‘The Effect of Providing Peer Information on Retirement Savings Decisions’, Journal of Finance LXX(3), pp. 1161–201.
18. The Harvard Business Review has a range of articles covering the various aspects of the entrepreneurial personality: for example, see Timothy Butler (2017), ‘Hiring an Entrepreneurial Leader’, Harvard Business Review, March–April, pp. 84–93, and Daniel McGinn (2016), ‘Is There a Connection Between Entrepreneurship and Mental Health Conditions?’, Harvard Business Review, 22 February. https://hbr.org/2016/02/222-entrepreneurship-ic-do-narcissists-make-great-entrepreneurs (accessed 7 September 2017).
19. Karen Blumenthal (2012), Steve Jobs: The Man Who Thought Different, London: Bloomsbury.
20. Kahneman (2011).
21. For more on the idea that risk is a feeling, see George F. Loewenstein, Elke U. Weber, Christopher K. Hsee and Ned Welch (2001), ‘Risk as Feelings’, Psychological Bulletin 127(2), pp. 267–86; and Paul Slovic (2010), The Feeling of Risk: New Perspectives on Risk Perception, London: Earthscan.
22. Burke, Baddeley, Tobler and Schultz (2010), pp. 8–9.
23. Cass R. Sunstein (2002), ‘Conformity and Dissent’, John M. Olin Law and Economics Working Paper No. 164, The Law School, University of Chicago. http://chicagounbound.uchicago.edu/public_law_and_legal_theory/68/ (accessed 5 September 2017).
24. For example, see David S. Landes, Joel Mokyr and William J. Baumol (eds) (2012), The Invention of Enterprise: Entrepreneurship from Ancient Mesopotamia to Modern Times, Princeton University Press.
25. Gavin Weightman (2015), Eureka: How Invention Happens, New Haven and London: Yale University Press.
26. On a similar track, economists Andrew Clark and Andrew Oswald develop the idea that individuals who want to be different may rationally decide to imitate: see Andrew E. Clark and Andrew J. Oswald (1998), ‘Comparison-Concave Utility and Following Behaviour in Social and Economic Settings’, Journal of Public Economics 70, pp. 133–55.
27. Quoted in Andrew Sinclair (2006), Viva Che! The Strange Death and Life of Che Guevara, Stroud: Sutton Publishing.
28. Quoted in Sinclair (2006).
29. For a contrasting view of fads and fashions, see Rolf Meyerson and Elihu Katz (1957), ‘Notes on a Natural History of Fads’, American Journal of Sociology 62(6), pp. 594–601.
30. Peter Beaumont, Antony Barnett and Gaby Hinsliff (2003), ‘Iraqi Mobile Labs Nothing to do with Germ Warfare, Report Finds’, Guardian, 5 June. https://www.theguardian.com/world/2003/jun/15/Iraq (accessed 7 September 2017); Justin Ling (2016), ‘The UK’s Iraq War Inquiry Vindicates a Whistleblower Who Took His Own Life’, Vice, 6 July. https://news.vice.com/article/the-uks-iraq-war-inquiry-vindicates-david-kelly-a-whistleblower-who-took-his-own-life (accessed 7 September 2017).
31. Kamal Ahmed (2003), ‘Revealed: How Kelly Article Set Out Case for War in Iraq’, Guardian, 31 August. https://www.theguardian.com/politics/2003/aug/31/davidkelly.iraq1 (accessed 7 September 2017).
32. This verdict was controversial, and some doctors publicly expressed their scepticism in a letter to the Guardian; see David Halpin, C. Stephen Frost and Searle Sennett (2004), ‘Our Doubts about Dr Kelly’s Suicide’, Guardian, 27 January. https://www.theguardian.com/theguardian/2004/jan/27/guardianletters4 (accessed 7 September 2017).
33. For example, Whistle-blowers Australia, an association instituted to protect the rights of those exposing corruption, malpractice and other wrongdoing: www.whistleblowers.org.au (accessed 7 September 2017). The US has introduced a range of legislation to protect whistleblowers, though the reach of this legislation is limited, especially those provisions relating to intelligence and national security: ‘Whistleblower Protection in the United States’, Wikipedia. https://en.wikipedia.org/wiki/Whistleblower_protection_in_the_United_States (accessed 7 September 2017). The UK government, meanwhile, provides advice for whistleblowers: ‘Whistleblowing for Employees: What is a Whistleblower?’ https://www.gov.uk/whistleblowing/what-is-a-whistleblower (accessed 7 September 2017). For a list of modern whistleblowers see ‘List of Whistleblowers: 2000s’, Wikipedia. https://en.wikipedia.org/wiki/List_of_whistleblowers#2000s (accessed 7 September 2017).
6 Entrepreneurs versus speculators
1. There are numerous biographies, of which Skidelsky’s is the most informative and engaging; see Robert Skidelsky (2005), John Maynard Keynes: 1883–1946 – Economist, Philosopher, Statesman, London: Penguin Books.
2. David Chambers, Elroy Dimson and Justin Food (2015), ‘Keynes the Stock Market Investor: A Quantitative Analysis’, Journal of Financial and Quantitative Analysis 50(4), pp. 431–49.
3. ‘Keynesian Investment: Returns Fit for King’s’, The Economist, 22 June 2012. http://www.economist.com/blogs/freeexchange/2012/06/keynesian-investment (accessed 7 September 2017); David Chambers, Elroy Dimson and Justin Foo (2013), ‘Keynes the Stock Market Investor: A Quantitative Analysis’, Journal of Financial and Quantitative Analysis 50(4), pp. 431–49.
4. For a history of financial crises see Charles P. Kindleberger and Robin Aliber (2005), Manias, Panics and Crashes: A History of Financial Crises, 5th edn, Hoboken, NJ: John Wiley and Sons.
5. The conventional use of money relates to the idea that money is a social institution, and this insight is cogently and comprehensively explored by Geoffrey Ingham (2013), The Nature of Money, Cambridge: Polity Press.
6. For an analysis of the economic implications of e-cash see Michelle Baddeley (2004), ‘Using e-Cash in the New Economy: An Economic Analysis of Micropayments Systems’, Journal of Electronic Commerce Research 5(4), pp. 239–53.
7. See https://bristolpound.org and https://brixtonpound.org (accessed 7 September 2017).
8. There is an extensive range of economic analysis of speculative herding, including some lab experiments. See for example M. Cipriani and A. Guarino (2005), ‘Herd Behavior in a Laboratory Financial Market’, American Economic Review 95(5), pp. 1427–43, and Mathias Drehmann, Jörg Oechssler and Andreas Roider (2005), ‘Herding and Contrarian Behavior in Financial Markets: An Internet Experiment’, American Economic Review 95(5), pp. 1403–26.
9. For an economic analysis of some famous examples, see Peter M. Garber (2001), Famous First Bubbles: The Fundamentals of Early Manias, Cambridge, MA: MIT Press. For an extensive range of other examples of speculative manias, see Mackay (1841).
10. See Edward Chancellor (1998), Devil Take the Hindmost: A History of Financial Speculation, New York/London: Plume/Penguin Books.
11. Generally, economists struggle to get an objective handle on value, one of the critiques highlighted in the Cambridge capital controversy of the 1970s; see for example Geoffrey C. Harcourt (1972), Some Cambridge Controversies in the Theory of Capital, Cambridge University Press.
12. The original formulation of the rational expectations hypothesis is attributed to John Fraser Muth (1961), ‘Rational Expectations and the Theory of Price Movements’, Econometrica 29(3), pp. 315–35.
13. For a review, see Eugene Fama (1970), ‘Efficient Capital Markets: A Review of Theory and Empirical Work’, Journal of Fina
nce 25, pp. 383–417.
14. Keynes (1936), ch. 12. See also John Maynard Keynes (1937), ‘The General Theory of Employment’, Quarterly Journal of Economics 51(2), pp. 209–23.
15. Keynes (1936, 1937).
16. Friedrich Hayek, a pioneer from the Austrian School of economics, proposed an alternative view to Keynes in exploring how knowledge unfolds as the product of social interactions. According to Hayek, as people observe a situation one by one, information is processed serially by each successive decision maker, creating a path-dependent process: other people’s past beliefs dictate the beliefs of their successors. See Friedrich Hayek (1952), The Sensory Order: An Inquiry into the Foundations of Theoretical Psychology, University of Chicago Press; Salvatore Rizzello (2004), ‘Knowledge as a Path-Dependence Process’, Journal of Bioeconomics 6(3), pp. 255–74.
17. There is continuity in the development of Keynes’ ideas about probabilistic judgements – as outlined in John Maynard Keynes (1921), A Treatise on Probability, London: Macmillan and Co., and his development of insights around conventions and social influences in the macroeconomy and financial system, as outlined in Keynes (1936, 1937).
18. Itzhak Venezia, Amrut Nashikkar and Zur Shapira (2011), ‘Firm Specific and Macro Herding by Professional and Amateur Investors and Their Effects on Market Volatility’, Journal of Banking and Finance 35, pp. 1599–609.
19. Richard Topol (1991), ‘Bubbles and Volatility of Stock Prices: Effect of Mimetic Contagion’, Economic Journal 101(407), pp. 786–800. There is an extensive economics literature on financial herding: for example, Andrea Devenow and Ivo Welch (1996), ‘Rational Herding in Financial Economics’, European Economic Review 40, pp. 603–15, and Christopher Avery and Peter Zemsky (1998), ‘Multidimensional Uncertainty and Herd Behavior in Financial Markets’, American Economic Review 88(4), pp. 724–48.
20. D.S. Scharfstein and J.C. Stein (1990), ‘Herd Behavior and Investment’, American Economic Review 80(3), pp. 465–79.
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