The adaptive markets hypothesis

The evolutionary element of markets

Economists have been accused of “physics envy”, an obsession with constructing precise mathematical models instead of studying the real, messy, world. But a new book suggests that economists have been looking at the wrong science; they should have focused on biology. The idea stems from the school of “behavioural economics” which observes that humans are not the kind of hyper-rational calculating machines that some models rely on them to be. As a result, markets are not always “efficient”—accurately pricing all the available information. ….[READ]