Psychological Bias as a Driver of Financial Regulation

Hirshleifer, David

Psychological Bias as a Driver of Financial Regulation

MPRA Paper from University Library of Munich, Germany

Abstract: I propose here the psychological attraction theory of financial regulation—that regulation is the result of psychological biases on the part of political participants—voters, politicians, bureaucrats, and media commentators; and of regulatory ideologies that exploit these biases. Some key elements of the psychological attraction approach are: salience and vividness, omission bias, scapegoating and xenophobia, fairness and reciprocity norms, overconfidence, and mood effects. This approach further emphasizes emergent effects that arise from the interactions of individuals with psychological biases. For example, availability cascades and ideological replicators have powerful effects on regulatory outcomes.

Keywords: Investor psychology; regulation; salience; omission bias; scapegoating; xenophobia; fairness; reciprocity; norms; mood; availability cascades; overconfidence; evolutionary psychology; memes; ideology; replicators (search for similar items in EconPapers)
JEL-codes: G0 G28 H0 H10 (search for similar items in EconPapers)
Date: 2007-10-02
New Economics Papers: this item is included in nep-cbe and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Psychological Bias as a Driver of Financial Regulation (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:5129

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