Consider these situations:
1) Financial Crisis:
Why did Economists across the world failed to see through the Financial Crisis that hit the world economy in 2008? There have been a whole set of reasons been put forward for the failure of the Financial Economy to withstand the Sub-Prime Crisis & inevitability of the Credit Crunch. Mostly, it has hovered around inadequate regulation.. incorrect Risk assessment of the financial structured products like CDO,CBS,MBS etc (These are derivative products which is understood by a chosen few.. others are clueless of the risks involved)
Well, the aspect of human behavior has been largely ignored. Paul Krugman, the Nobel Prize winner & famous economist, has advocated that the root cause of the Crisis could be the irrational behavioral traits shown by humans in some situations especially when deciding in a group even though individually they may be rational human beings. This is a new and upcoming branch of finance known as Behavioral Finance which explores the herd behavioral traits in people when they make financial decisions.
Btw: Being irrational.. is being human.. just that you have to consider this irrationality when you are developing those complex mathematical models & financial products.
2)Communal violence:
In a Communal or ethnic violence taking place any where in the world.. you ll find perfectly normal humans behaving irrationally like beasts in groups in those moments of raze & madness.. killing fellow humans. The herd mentality allows them to justify their acts to themselves.
That is why, the World Leaders should take care of the irrationality involved in human behavior & have proper checks and balances else it erupts like a volcano with catastrophic results, as in both the above cases.
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