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FIRSTMONDAY
2010

Bubbles, gullibility, and other challenges for economics, psychology, sociology, and information sciences

9 years 12 months ago
Bubbles, gullibility, and other challenges for economics, psychology, sociology, and information sciences
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 business and technology leaders 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 phen...
Andrew M. Odlyzko
Added 02 Mar 2011
Updated 02 Mar 2011
Type Journal
Year 2010
Where FIRSTMONDAY
Authors Andrew M. Odlyzko
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