Craving Risk - Neuroeconomics and the Rogue Trader

” The brain images of drug addicts who are about to take another hit are indistinguishable from those of traders who are making money and about to place another trade.” This quote comes from Jason Zweig author of “The Intelligent Investor” and one of several economists quoted in a terrific article on neuroeconomics in yesterday’s New York Times. On the day that Societe Generale rogue trader Jerome Kerviel has been jailed while the $7bn bank fraud is being investigated, this article looks at whether ideas drawn from neuroeconomics can help us to understand the trading behaviour of people in the world’s licensed betting shops ..... sorry…. financial markets. Wikipedia tells us that ‘neuroeconomics combines neuroscience, economics, and psychology to study how we make choices. It looks at the role of the brain when we evaluate decisions, categorize risks and rewards, and interact with each other.’ For students with a keen eye to current market turbulence this is an excellent article to read.