Economics Archives

The Flaws of Efficient Market Hypothesis in Behavioral Finance

A person picking a dollar bill from a money tree

What’s the efficient market hypothesis in behavioral finance? What are the flaws of the efficient market hypothesis? While famous economist Richard H. Thaler agrees with the EMH’s claim that it’s impossible to consistently beat the market, he disagrees with the claim that securities’ prices always reflect their intrinsic value. He considers three arguments against this thesis. Take a look at the three arguments against the efficient market hypothesis below.

Prisoner’s Dilemma in Economics: Would You Betray or Cooperate?

Prisoners holding dollar bills behind bars as symbolism of prisoner's dilemma in economics

What’s the prisoner’s dilemma in economics? How does the prisoner’s dilemma represent cooperation? The prisoner’s dilemma is an experiment that reveals if people would betray or cooperate with their partners, depending on the reward and punishment. This theory can be applied in an economic setting as well. Check out how the prisoner’s dilemma works when it comes to finances.

What Is the Law of One Price? How It Disputes the EMH

A man thinking about the law of one price with dollar signs as eyes.

What is the law of one price? How do closed-end funds violate the law of one price? According to economist Richard H. Thaler, one argument against the efficient market hypothesis is the violation of the law of one price. This is a thesis from traditional economics that a security should never sell at two different prices at the same time. Continue reading to learn more about why the law of one price isn’t consistent with the efficient market hypothesis.

The Top Misbehaving Quotes by Richard H. Thaler

A dollar shaped as a triangle in front of an open book.

What are the best Misbehaving quotes on behavioral economics? Why do consumers behave the way they do in economic situations? In Misbehaving, Richard H. Thaler makes the bold argument that traditional economics is no longer applicable. That’s because people behave irrationally when making financial decisions. To get a better understanding of Thaler’s arguments, check out his best Misbehaving quotes.

The East India Company in Bengal: Overseers of Crisis

The British and Indians meeting in a historical landscape in late 18th century.

How did the East India Company govern in Bengal? How did it contribute to one of the worst disasters in the region’s history? What’s the Bengal Bubble? After the collapse of India’s Mughal empire, the East India Company expanded its trading operations and military capacity. The company set its sights on Bengal, a wealthy province on India’s northeastern coast. It took advantage of political chaos to rise to power. Read more to learn about the East India Company in Bengal, specifically how it maintained and used its power and the impact it had on the province.

Misbehaving by Richard H. Thaler: Book Overview & Takeaways

An open book on a messy desk topped with papers.

Why is traditional economics outdated? Why are behavioral economics important in everyday life? In Misbehaving, Richard H. Thaler says that the theories of traditional economics rest on a faulty foundation. Traditional economics assumes that consumers act rationally and that financial markets reflect securities’ true values. Read below for a brief overview of Misbehaving.

The Expansion and Consolidation of British Power in India

How did India come under British governance? What role did the East India Company play? When and how did the Indian people cast off colonial rule? In The Anarchy, historian William Dalrymple explains the expansion and consolidation of British power in India. He does this by tracing the ascent of the East India Company from a modest group of merchants to the imperialist superpower. Keep reading to learn the background of British colonial rule in India.

The Future of Fusion Energy: A Money Pit or a Smart Investment?

What does the future of fusion energy look like? What are the main benefits and challenges associated with it? Fusion energy, once seen as wishful thinking, is gaining renewed attention due to recent advancements, potentially offering an abundant, eco-friendly power source. Private companies are pouring billions into fusion startups racing to make commercial reactors a reality within a decade. Continue reading to learn what fusion energy is and how it might be used in the future.

The Impact of Federal Reserve Interest Rate Hikes on Americans

What toll are the Federal Reserve interest rate hikes having on Americans and businesses? What are the consequences if rates continue to rise? Aggressive Federal Reserve interest rate hikes have driven borrowing costs to painful heights, jeopardizing US household and business finances. Americans are struggling with soaring mortgage, credit card, and auto loan rates, accumulating record-high credit card debt. Here’s a look at the impact the rise in interest rates is having on Americans.

When Genius Failed by Roger Lowenstein: Overview

Why did the hedge fund LTCM fail so horribly? What can you learn from LTCM’s failure? In When Genius Failed, Roger Lowenstein explores the spectacular rise and catastrophic 1998 collapse of the hedge fund Long-Term Capital Management (LTCM). He explores the history of LTCM, how its models operated, and how its success turned into a failure. Read below for a brief overview of When Genius Failed.