#79: On Radical Uncertainty, "Phantastic Objects", and Blowing Bubbles – David Tuckett

David Tuckett is a psychoanalyst, Professor, and Director of the Centre for the Study of Decision-Making Uncertainty at University College London. He founded a new field of research known as “emotional finance”.

Show notes

Selected links

• Follow David: Website | Twitter
• Minding the Markets, by David Tuckett
• Risk, Uncertainty and Profit, by Frank Knight
• The Poverty of Historicism, by Karl Popper
• ‘The role of emotions in financial decisions’, 2012 Nicholas Barbon Lecture by David Tuckett
• ‘The role of conviction and narrative in decision-making under radical uncertainty’, 2017 paper by David Tuckett introducing “Conviction Narrative Theory”
• Uncertain Futures, by Jens Beckert
• Irrational Exuberance, by Robert Shiller
• Dymphna Boholt’s property podcast
• Aussie Home Loans’ extrapolated median house values by 2043 report
• A Crisis of Beliefs, by Shleifer and Gennaioli
• ‘Extensional Versus Intuitive Reasoning: The Conjunction Fallacy in Probability Judgment’, 1983 paper by Tversky and Kahneman that reports the “Linda problem”
• Rage Inside the Machine, by Robert Smith
• The General Theory of Employment, Interest, and Money, by John Maynard Keynes
• Descartes’ Error, by Antonio Damasio
• Narrative Economics, by Robert Shiller
• ‘Narrative Economics’, Robert Shiller’s 2017 presidential address to the AEA
• The Foundations of Statistics, by Leonard Savage
• ‘Tracking phantastic objects: A computer algorithmic investigation of narrative evolution in unstructured data’, 2014 paper by David Tuckett et al
• ‘Do Gun Buybacks Save Lives?’, paper by Andrew Leigh and Christine Neill
• ‘Recourse and Residential Mortgage Default: Theory and Evidence from U.S. States’, working paper by the Richmond Fed
• A Short History of Financial Euphoria, by John Kenneth Galbraith
• ‘The Housing Market and the Economy’, 2019 speech by Philip Lowe

Topics discussed

• What do modern psychoanalysts do? And David’s journey to founding “emotional finance”. 4:37
• Knightian uncertainty. 9:52
• Why is the future fundamentally uncertain? 14:20
• Does a world of Knightian uncertainty give us carte blanche to believe whatever we want to about fundamentals? 22:18
• Are extrapolative claims peddled by Australian property gurus in any sense “irrational”? 31:18
• The great rationality debate and the (limited) contributions of behavioural economics. 40:46
• The role of emotions in financial decision-making. 57:25
• Asian buyers narrative in the Australian housing market. 1:06:36
• What is a “narrative” in the context of market fundamentals? 1:12:18
• “Phantastic objects” and how to find them. 1:25:19
• “Divided states”. 1:36:14
• Not groupthink, but groupfeel. 1:45:00
• Joe’s statistically insignificant theory about housing bubble bears. 1:52:26
• A heuristic for spotting when the market views something as a phantastic object. 1:58:51
• The anatomy of a bubble. 2:00:41
• Houses as phantastic objects. 2:02:33
• How small groups of fanatics can blow bubbles. 2:09:41
• What should policy-makers and central bankers take from David’s research? 2:13:52