Department of Informatics

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Mr Market on the Couch; Introducing the Market Mind Hypothesis, the Final Frontier of Behavioural Finance

Tuesday 10 March 16:00 until 17:30
Arun 401
Speaker: Patrick Schotanus
Part of the series: COGS Seminars

This presentation introduces the Market Mind Hypothesis (MMH). MMH pushes the respective boundaries of both the extended/distributed mind theory and behavioural finance. Popularly speaking, MMH recognises that Mr Market has a mind, warts and all. In simple terms, MMH formalises what investors have always casually referred to as "the market's mind", including its relationship to the real (physical) economy which showed a dangerous tail-wagging-the-dog dynamic during the Global Financial Crisis (GFC). More technically, MMH states that the market, embodying interacting conscious investors and their technologies, not only distributes their knowledge but also intersubjectively extends their minds, thereby manifesting collective consciousness. Prices form the signatures of this, while market mood is its phenomenal experience. Unfortunately, Mr Market has not been healthy for a while and neither has the wider economic community of which he is part (exemplified by excessive debt, negative yields, and flash crashes). The key cause is, simultaneously, also mainstream economics' "true problem": not recognising, let alone addressing economics' "hard problem". Specifically, driven by physics envy its mechanical "equilibrium" paradigm views and treats (e.g. via monetary policies) the economy as a machine, the market as an automaton, and humans as robots. In short, mainstream economics has made a flawed ontological commitment that is becoming very expensive. This is particularly relevant in light of the almost uncritical embracement of AI and other automation, but also in the context of ESG investing. The presentation will cover this, as well as numerous other topics, including historic origins, Lehman's Lesson, price discovery, and the projects (to be) hosted on our MMH Research Platform, a unique collaboration between the University of Edinburgh and COGS, supported by the Edinburgh Futures Institute.

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By: Simon Bowes
Last updated: Tuesday, 11 February 2020

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