Archive for November 13th, 2017

How Newton learned about financial gravity the hard way…

November 13, 2017

Interesting post by Jason Zweig (HT. V. A. Nageshwaran).

Zweig picks this paper by Andrew Odlyzko of  University of Minnesota which looks at Newton’s investments and eventual losses in South Sea Bubble :


The deeply held religious convictions that kickstarted capitalism

November 13, 2017

A video which explains how Calvinism led to capitalism:


What is money? A sociological perspective..

November 13, 2017

An interesting piece (written in Jun-2017) dealing with many aspects of money (HT: EconomicSociology blog).

The article is based from a book edited by Nina Bandelj, Frederick F. Wherry & Viviana A. Zelizer.

Zelizer writes this piece:

If all money is the same, why do we call some dollars “dirty” — or even “blood money” — and others “honest”? Why is the money we earn as a salary often spent differently from a lottery winning? Why did we invent gift certificates rather than offer straight cash? Why do organizations construct elaborate compensation systems marking differences between salaries, bonuses, and perks? Why is it that a wife’s money is often spent differently from her husband’s?

Some of these questions are getting unexpected answers. In the past few decades, novel approaches to money have challenged conventional wisdom: money is not one thing but many things. It turns out that how the money is earned, by whom, what it is spent on, when, and for whom often matters as much as — or more than — how much money is involved in the transaction. At stake is not just the quantity of money, but its quality; and that quality is variable. Consider, for instance, the powerful democratic symbolism of the small sums of money donated to Bernie Sanders’s presidential campaign in 2016. Surely, not all dollars are equal.

What explains money’s multiplicity? Behavioral economics tells us that people keep track of their finances by creating discrete mental compartments for their various moneys: rent money is thus set apart from entertainment money, investment money, or charity money. Unexpected funds occupy a different cognitive space from a salary or other forms of routine income, even when the sums involved are identical. People are likely to spend such windfalls less cautiously and more rapidly.

But these intriguing psychological partitions only explain part of money’s variability. Sociologists go further by showing how all of us dispense different “kinds” of money to mark distinctions among our social relations: we tip a waiter but not our spouse, we may give our child a weekly allowance but rarely our grandfather, we pay our employee with a salary not a gift certificate (unless it’s Christmas). We all care deeply about such monetary distinctions: the wrong kind of money might sometimes amuse us but will more often shock or offend. Why? Because mistakes violate our expectations of how social relations should work. Imagine my (and the administration’s) shock if one of my students offered me a bonus as an incentive to teach a better class.

Always interesting to go beyond economics view of money…

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