An interesting look at the evolution of several approaches to the market, economics equations, and schools of thought designed to address economics mysteries. The careful tracing of specific professors and their students makes for quite a complex geneology of ideas– but it’s fascinating to see the players of today, the schools and clumps of association that led to development of theories.
The easy takeaways are that markets may not be rational– but in the ways that are bad for an individual investor, you might as well assume they are. People don’t leave money on the table if they can help it– so if you spy an opportunity, it’s always best to try to figure out what you’re overlooking. The increasing influence of behavioral economics seems “fringy” to the mainstream– really, they mostly seem to be providing formulas and quantification that match the pre-1940s economist’s caveats, just expressed in math instead of disclaimers.
I like the idea of behavioral economics research– testing where the limits of human rationality and patience are and figuring out which systematic biases we have. It seems like a fruitful line of investigation, and a good corrective to the all seeing market… at least for now.