Posted: May 11, 2012 by Wildcat in Uncategorized
Tags: , , , , ,

It’s been a tough few years for Wall Street. Traders got big bonuses for taking foolish risks, while taxpayers got stuck with the bill. But without the financial industry’s machinations, Facebook couldn’t go public, your neighbor couldn’t get a mortgage and we’d all be stuck buying cars with cash. This raises the obvious question: How can we ensure that Wall Street doesn’t get carried away as it did before the 2008 meltdown? That traders aren’t seduced by foolish risks in the near future? One approach has been increased governmental regulation, such as the Dodd-Frank Act of 2010, which attempts to reign in the excesses of the financial industry with new rules and restrictions. Only time will tell if this strategy works. A different approach to reducing the irrationality of Wall Street can be found in new research led by Steve Sapra and Paul Zak, neuroeconomists at Claremont Graduate University. Dr. Zak got the idea for the paper after spending time with leading analysts and traders at a conference. “These guys are a pretty weird bunch,” he says. “They’re very rational and very competitive.” (via Jonah Lehrer on Genetics, Dopamine and Wall Street | Head Case – WSJ.com)

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