Behavioural finance studies have examined how herding, availability heuristics, loss aversion affect real markets.
There are many other forms of irrationality acting on financial markets.
The findings in the study are limited and small-scale. The Science study found that participants in a volatile situation formed illusory correlations between infrequent negative information and infrequently mentioned companies, which affected their investment decisions.īut do "illusions drive market havoc" as BBC suggests? That may be another story. One study found that superstition affects many market decisions (especially under situations of uncertainty) and leads people to pay significantly more for "lucky" products. This may be individually emotionally adaptive, but lead to mistaken decisions. Regaining a sense of control, even an illusory one, helps people cope with stress. A classic example is from Bronislaw Malinowski, who noted that islanders in the Pacific who fished offshore outside the coral reef had many rituals and ceremonies to ensure safety and protection, while the inshore fishermen were far less superstitious. This is likely the root of many superstitions. It is not surprising that people are willing to go to great lengths to achieve control, even if it is illusory. That people desire the feeling of control in their lives is universal people who experience loss of control become depressed, anxious and may lose health. The Science paper is timely, but hardly surprising. But is this the key to understanding the financial turmoil? 115-117) demonstrated that when people feel they lack control, they see more illusory patterns in noise and stock market information, perceive conspiracies and accept superstitions more readily. Jennifer Whitson and Adam Galinsky ( Lacking Control Increases Illusory Pattern Perception, Science 3 October 2008 Vol. Some new studies suggest this may be making the current market troubles worse. She has taken part in, or directly led, the design and establishment of innovative new institutions, such as the European Research Council, Collegium Budapest or Central European University.Humans regularly see patterns where there are none, but stress makes this tendency worse. She has worked with European intergovernmental and non-governmental organizations and bodies, such as the European Science Foundation, governmental agencies in several countries of East and West as well as independent organizations and committees of scholars. For several decades Helga Nowotny has been one of the most influential institution builders in European higher education and research. Helga Nowotny is one of the most prominent scholars in science studies worldwide, an area that counted Yehuda Elkana as one of its pioneers and promoters. We are now moving into an era where this control is limited as AI monitors our actions, posing the threat of surveillance, but also offering the opportunity to reappropriate control and transform it into care. These developments also challenge the narrative of progress, which played such a central role in modernity and is based on the hubris of total control. Helga Nowotny argues that at the heart of our trust in AI lies a paradox: we leverage AI to increase control over the future and uncertainty, while at the same time the performativity of AI, the power it has to make us act in the ways it predicts, reduces our agency over the future. The inaugural Yehuda Elkana Fellow, Helga Nowotny, gave a lecture at the Central European University, in cooperation with the IWM and the Hannah Arendt Center for Politics and Humanities at Bard College. The lecture was preceded by a ceremony to commemorate Yehuda Elkana.Īs we move into a world in which algorithms, robots and avatars play an ever increasing role, we need to better understand the nature of AI and its implications for human agency.