Stock market bubbles: Our evolutionary roots explain why investors follow the herd

The same parts of the brain that help us navigate complex social interactions can also drive us to make wildly bad investments.

  • Stock market bubbles, or asset bubbles, refer to a situation where stocks are valued far above what they're fundamentally worth.
  • Unique factors contribute to each stock market bubble, but all play out in a generally similar series of stages.
  • Research on the human social brain network offers insight into why investors participate in asset bubbles.
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No news is good news? Think again

Information economics suggests that "no news" means somebody is hiding something. But people are bad at noticing that.

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  • An experiment in information sharing shows that no news often means people have something to hide.
  • Other people seem to be blissfully unaware of this.
  • The results suggest that market forces are insufficient to "close the information gap" between buyers and sellers.
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Conspicuous consumption is over. It’s all about intangibles now

These new status behaviours are what one expert calls 'inconspicuous consumption'.

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In 1899, the economist Thorstein Veblen observed that silver spoons and corsets were markers of elite social position.
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Restoring a healthy economy will require a local focus. Here’s why.

How will the current challenges to the global economy pressure it to change?

  • Life is different everywhere—it is determined by the context of a unique culture and a unique geography. The same goes for economies. Local economies are unique to their contexts, says John Fullerton, founder and president of Capital Institute.
  • "[I]magine if you thought about human economic development from a place-based perspective," says Fullerton. "You would have, instead of a global corporation like Apple, thought of as a single thing, you would have Apple's manufacturing plant in China as part of the Chinese bioregional economy."
  • The pressure on the current global economy will cause it to shift and evolve into a healthier state of community-based economic development.
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How will COVID-19 impact the economy?

Economics professor Stephen M. Miller shares his insights in this exclusive interview.

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  • Stephen M. Miller, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas, gives insight into how the COVID-19 pandemic impacts American economies.
  • Calling it a "trade-off between public health and economic health," Miller explains why social distancing is a necessary measure to avoid a total crash of economies.
  • The SIR model, which is a guide to assessing how much of the population is actively infected, shows what could happen if the active cases of infection goes above 10% of the population.
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