A gullibility index would be of great benefit to politicians.
Ed
----- Original Message -----
From: "Arthur Cordell" <[email protected]>
To: "'RE-DESIGNING WORK, INCOME DISTRIBUTION,EDUCATION'"
<[email protected]>
Cc: <[email protected]>
Sent: Thursday, August 05, 2010 3:18 PM
Subject: [Futurework] FW: paper on technology manias and gullibility
> This paper might be of interest to some.
>
> Arthur
> =========================
>
>
>
> http://www.dtc.umn.edu/~odlyzko/doc/mania03.pdf
>
>
>
>
> Bubbles, gullibility, and other challenges for economics,
> psychology, sociology, and information sciences
>
> Andrew Odlyzko
>
> School of Mathematics
> and Digital Technology Center
> University of Minnesota
>
> [email protected]
> http://www.dtc.umn.edu/~odlyzko
>
> Preliminary version, August 5, 2010
>
>
> ABSTRACT
>
> Gullibility is the principal cause of bubbles. Investors and the
> general public get snared by a "beautiful illusion" and throw caution to the
> wind. Attempts to identify and control bubbles are complicated by the fact
> that the authorities who might naturally be expected to take action have
> often (especially in recent years) been among the most gullible, and were
> cheerleaders for the exuberant behavior. Hence what is needed is an
> objective measure of gullibility.
>
> This paper argues that it should be possible to develop such a
> measure. Examples demonstrate, contrary to the efficient market dogma, that
> in
> some manias, even top-level business and technology leaders do fall prey to
> collective hallucinations and become irrational in objective terms.
> During the Internet bubble, for example, large classes of them first became
> unable to comprehend compound interest, and then lost even the ability to do
> simple arithmetic, to the point of not being able to distinguish 2 from 10.
> This phenomenon, together with advances in analysis of social networks and
> related areas, points to possible ways to develop objective and quantitative
> tools for measuring gullibility and other aspects of human behavior implicated
> in bubbles. It cannot be expected to infallibly detect all destructive
> bubbles, and may trigger false alarms, but it ought to alert observers to
> periods
> where collective investment behavior is becoming irrational.
>
> The proposed gullibility index might help in developing realistic
> economic models. It should also assist in illuminating and guiding decision
> making.
>
>
>
>
>
>
>
> ------------------------------------------------------------------------
> -----
>
> The previous three papers in this series are available at:
>
> 1. Collective hallucinations and inefficient markets: The British
> Railway
> Mania of the 1840s
>
> http://www.dtc.umn.edu/~odlyzko/doc/hallucinations.pdf
>
>
>
> 2. This time is different: An example of a giant, wildly speculative,
> and
> successful investment mania, B.E. Journal of Economic Analysis & Policy,
>
> vol. 10, issue 1, 2010, article 60 (registration required)
>
> http://www.bepress.com/bejeap/vol10/iss1/art60
>
>
> preprint available at:
>
> http://www.dtc.umn.edu/~odlyzko/doc/mania01.pdf
>
>
>
> 3. The collapse of the Railway Mania, the development of capital
> markets, and
> Robert Lucas Nash, a forgotten pioneer of accounting and financial
> analysis
>
> http://www.dtc.umn.edu/~odlyzko/doc/mania02.pdf
>
>
> ------------------------------------------------------------------------
> -----
>
> Source materials for the Railway Mania and the Internet bubble are
> available
> at the web pages
>
> http://www.dtc.umn.edu/~odlyzko/rrsources/
>
>
> and
>
> http://www.dtc.umn.edu/~odlyzko/isources/
>
>
>
>
>
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