The Fear Factor (eBook)

COLIN READ is Professor of Economics and Finance at SUNY College at Plattsburgh, and a columnist for the Plattsburgh New York Press Republican newspaper. He has taught economics and finance for 25 years. His recent books include Global Financial Meltdown: How We Can Avoid the Next Economic Crisis and International Taxation Handbook (edited with G. Gregoriou). He has written dozens of papers on market failure, volatility, and housing markets, writes a monthly column in a business trade journal, and appears monthly on a local PBS television show to discuss the regional and national economy.

Introduction PART I: THE NATURE OF RISK The Biology and Psychology of Fear An Economic Definition of Fear and Risk PART II: THE SUPPLY AND DEMAND OF LOANABLE FUNDS The Demand Side The Supply Side Balance of Capital PART III: MEASUREMENT OF RISK The Risk Premium - How Risk Affects Expected Returns The Fear Premium The Demographics of Risk and Fear The Microeconomics of Risk Aversion PART IV: THE PROBLEMS WITH RISK Moral Hazard Privatized Gains and Socialized Losses Adverse Selection and Imperfect Information Risk, Uncertainty, Fear, and Gambling PART V: RISK AND THE MARKET Market Volatility and Returns Fear, Panic, and Market Returns The Fear Factor PART VI: A HISTORY OF PANICS A Brief History of the Fear Gripped Market The Roaring Twenties and the Great Crash The Depression-Gripped Economy Along Comes Keynes PART VII: COORDINATION FAILURES The Market for Lemmings, or Tale of Two Cultures The Role of Machines and Programmed Trading The Ratings Agencies - More Perfect Information? PART VIII: SOCIAL RESPONSIBILITY AS AN ANTIDOTE TO FEAR Where Were the Regulators Ethics and Social Responsibility Wall Street, Main Street, and the Social Contract PART IX: INSTITUTIONS THE AMELIORATE OR AMPLIFY FEAR The Media as an Antidote to Fear Politics That Fan the Flames of Fear Is There More to Fear than Fear Itself? PART X: SOLUTIONS AND CONCLUSIONS Economic Leadership as an Antidote to Fear A Dozen Prescriptions to Take Back the Markets Conclusions Glossary Index Endnotes