Social finance as cultural evolution, transmission bias, and market dynamics

Erol Akçay () and David Hirshleifer
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Erol Akçay: Department of Biology, University of Pennsylvania, Philadelphia, PA 19104

Proceedings of the National Academy of Sciences, 2021, vol. 118, issue 26, e2015568118

Abstract: The thoughts and behaviors of financial market participants depend upon adopted cultural traits, including information signals, beliefs, strategies, and folk economic models. Financial traits compete to survive in the human population and are modified in the process of being transmitted from one agent to another. These cultural evolutionary processes shape market outcomes, which in turn feed back into the success of competing traits. This evolutionary system is studied in an emerging paradigm, social finance. In this paradigm, social transmission biases determine the evolution of financial traits in the investor population. It considers an enriched set of cultural traits, both selection on traits and mutation pressure, and market equilibrium at different frequencies. Other key ingredients of the paradigm include psychological bias, social network structure, information asymmetries, and institutional environment.

Keywords: evolutionary finance; cultural evolution; social interaction; behavioral economics; social finance (search for similar items in EconPapers)
Date: 2021
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Working Paper: Social Finance: Cultural Evolution, Transmission Bias and Market Dynamics (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:nas:journl:v:118:y:2021:p:e2015568118

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