Greenspan as a behavioral economist

March 20, 2008 BY danariely

Zubin Jelveh just posted a very interesting blog post relating to Alan Greenspan’s recent piece in the Financial Times.Zubin ends the post by saying:”Just last month, Steve Levitt and John List of the University of Chicago wrote that as neat as the findings of behavioral economics have been over the past two-and-a-half decades, their practical usefulness has remained marginal:

Perhaps the greatest challenge facing behavioral economics is demonstrating its applicability in the real world. In nearly every instance, the strongest empirical evidence in favor of behavioral anomalies emerges from the lab. Yet, there are many reasons to suspect that these laboratory findings might fail to generalize to real markets.

I’d like to add the financial collapse of 2007-08 as Exhibit A.” I am not sure if this is Exhibit A (I think we had a few before), but I do think that it deserves some serious attention and some serious consideration of how to prevent this from happening again. Irrationally yours, Dan