Cambridge University neuroscientist John Coates has a theory on why Wall Street traders bounce from manic highs to depressive lows and take financial markets with them. It is, he thinks, a matter of hormones: specifically testosterone and cortisol.
Coates is the second speaker on the Cambridge University podcast The credit crunch: history, hormones and trust (website, iTunes). He is joined by economic historian Martin Daunton,and anthropologist Alan Macfarlane.
Coates’ research on securities traders suggests that when they are successful, their bodies pump out the hormone testosterone, which clouds their judgment, making them disregard risk and throwaway caution. Similarly, when they are losing money there levels of cortisol rise dramatically, which makes them risk-averse and too cautious. He suggests that the world financial system would benefit if trading floors employed more women, who of course are not prone to testosterone poisoning.
For a another view of the economic crisis and where it might be heading now, check out Credit Crunch Live (website, iTunes), a panel discussion from Oxford University, featuring Oxford economists Linda Yueh, Martin Slater, Outi Aarnio and John Knight.