Rediscovering the human and forgetting the natural in economics and finance

Abstract

When did finance stop thinking about behaviour? The ascendency of the "rational man" model of finance has been strongly influenced by the notion of markets as being akin to natural systems. The question rapidly changes from asking when did finance stop thinking about behaviour to when did finance start thinking about itself as the motion of bodies in a vacuum? It is "the illusion of free markets" that creates the fundamental intellectual difficulties that made the "human" aspects of finance so quickly disappear during the 20th century, only the burst upon the scene when their absence gave rise to such damaging ideas, policies and laws. This paper will look briefly at how the desire of economics and finance to join the canon of natural sciences produced a discipline that slowly cut away the very ground it stood upon.