According to neoclassical economic theory, market participants should behave rationally in their pursuit of positive investment outcomes. But this is not the case in reality, and Jonathan Adair Turner explains why in this brief World Economic Forum IdeaLab talk. getAbstract recommends Turner’s basic lesson to neophyte investors who wish to learn how financial markets tick and prescribes his provocative discussion topic to market analysts and policy makers seeking a more stable, less crisis-prone financial system.
In this summary, you will learn
- How, according to neoclassical economic theory, markets should function;
- Why reality doesn’t reflect theory; and
- Why surges of “irrational exuberance” in investing can sometimes lead to positive long-term outcomes.
About the Speaker
Jonathan Adair Turner of the Institute for New Economic Thinking is also a member of the Bank of England’s Financial Policy Committee.