Comments on: Societe Generale – behavioral economics at work

By: fred

fred — Mon, 10 Mar 2008 23:19:19 +0000

This test may not show relevance to JK’s actions, because (so far) there is no evidence of personal gain…

By: Chris Farley

Chris Farley — Mon, 25 Feb 2008 19:50:05 +0000

How does this relate to casinos using chips?

By: dan

dan — Sun, 17 Feb 2008 03:49:52 +0000

It is clear that cheating is complex and that it has many aspects and causes.

The point I wanted to make is that one of these is that it becomes much easier for us to cheat and at the same time see ourselves as honorable, when cheating is carried out in non-monetary-currency.

Given the way society is moving and the increased prevalence of non-monetary-currency, I think this is a real issue we should be concerned with.

By: on.the.other.hand

on.the.other.hand — Mon, 04 Feb 2008 04:01:09 +0000

Here's another possible explanation for JK's behavior. The declining performance of his trades posed a threat to his perceived level of competence. He reacted by attempting to expose the weakness in SG's risk control system.

By: michael

michael — Mon, 04 Feb 2008 03:35:05 +0000

Dan writes: ” I suspect is why Jerome Kerviel was able to erase $7.14 billion for Societe Generale. After all, he was dealing with stock derivatives that are multiple steps removed from cash”

The actual loss was created by Soc Gen selling out the position in 2 or 3 days.

Apparently, the position had been a winner up until the end of December, 2007. But hidden by fake trades because JK was way over his limit.

I very much doubt that JK was cheating in the way he is being portrayed.

It will be an interesting story to watch.

By: Petar

Petar — Sun, 03 Feb 2008 21:19:20 +0000

While “remoteness from cash” might have very well been in factor in Jerome Kerviel’s actions, it would not be the one the post mentions (stock derivatives vs. stocks vs. cash), but one directly linked to incentives – good performance leading to higher bonus and promotion vs. directly getting cash for himself.

By: Metatone

Metatone — Sun, 03 Feb 2008 12:04:27 +0000

An interesting extra question would have been to see how many cheated when there was no monetary reward for cheating…

By: Davidson Heath

Davidson Heath — Fri, 01 Feb 2008 15:07:16 +0000

While once warned against it by a pretty smart guy, I can’t help thinking about the (evolutionary) psychological mechanism involved here. What about food, clothing or reproductive “resources” – surely those would be even more visceral than cash? Do people have a bigger problem walking out on a $20 meal than stealing $20 from the till?