The Myth of the Rational Market: Nudging Each Other Away from Fool���s Gold

A flurry of media commentary and several new books are focused on the recent financial crisis and near economic collapse. A Newsweek article by Zakaria (2009), ���Greed is Good (To a Point),��� suggests reconsidering the role of greed in capitalism. This is also the theme in Fools Gold (Tett, 2009), a story about the way derivatives markets have evolved: showing greed at its worst. In many ways this is the core source of the current set of problems. In some sense, these perspectives are integrated in The Myth of the Rational Market by Fox (2009), who traces the thinking on the efficient market hypothesis, now understood for what it is: a myth. Both books are based in large part on interviews with major players in the crisis. There are also books drawing mainly on science, but still quite accessible to general readers, as represented in Nudge by Thaler and Sunstein (2008). Both have done extensive research on human foibles in economic choice. There is also Animal Spirits (Akerlof and Schiller, 2009), a book about what Keynesian economics is really about, a look at human forces at work. Akerlof is a Nobel prize winner in economics, who before this has pointed to the problems with presuming rationality in real markets. Schiller is one of the few economists who predicted these events.

Model complexity affects transient population dynamics following a dispersal event: A case study with pea aphids

Stage-structured population models predict transient population dynamics if the population deviates from the stable stage distribution. Ecologists��� interest in transient dynamics is growing because populations regularly deviate from the stable stage distribution, which can lead to transient dynamics that differ significantly from the stable stage dynamics. Because the structure of a population matrix (i.e., the number of life-history stages) can influence the predicted scale of the deviation, we explored the effect of matrix size on predicted transient dynamics and the resulting amplification of population size. First, we experimentally measured the transition rates between the different life-history stages and the adult fecundity and survival of the aphid, Acythosiphon pisum. Second, we used these data to parameterize models with different numbers of stages. Third, we compared model predictions with empirically measured transient population growth following the introduction of a single adult aphid. We find that the models with the largest number of life-history stages predicted the largest transient population growth rates, but in all models there was a considerable discrepancy between predicted and empirically measured transient peaks and a dramatic underestimation of final population sizes. For instance, the mean population size after 20 days was 2394 aphids compared to the highest predicted population size of 531 aphids; the predicted asymptotic growth rate (��max) was consistent with the experiments. Possible explanations for this discrepancy are discussed. Includes 4 supplemental files.