Description: This course develops a new perspective on the dynamics of financial markets and the roles that human behavior and the business environment play in determining the evolution of behavior and institutions. Although neoclassical economic theories such as expected utility maximization, rational expectations, general equilibrium, and efficient markets have dominated the literature on economic behavior and market structure, recent advances in the cognitive neurosciences, artificial intelligence, computational social science, and evolutionary biology provide a number of new insights into market dynamics. We will draw on these diverse disciplines to develop a more complete understanding of human behavior in the specific context of markets and other economic institutions. Academic research will be the main focus of the course, but topics will be motivated and illustrated by practical applications from financial markets, the hedge fund industry, private equity, government regulation, and political economy. Using the ideas from this new perspective, we will formulate several new hypotheses regarding recent challenges to traditional economic thinking, including: how financial crises are formed and whether or not they can ever be eliminated; why certain investment strategies seem to wax and wane; where business cycles come from; what role ethics plays in financial intermediation; whether capitalism is more sustainable than other political systems; and why financial engineering may be the solution to some of society’s biggest challenges.
Course #: 15.S68
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