Professor David Tucket Awarded INET Grant

Professor David Tuckett has been awarded nearly $250,000 to research the role of emotions in economics.

The Institute for New Economic Thinking (INET) grant will enable Professor Tuckett to examine how unconscious processes can cause swings in the financial markets.

The research, which will take place over 2.5 years, will be based on interdisciplinary insights into the social and psychological context that trading financial assets create and in which decisions are made.

David Tuckett, who is a visiting Professor in Psychoanalysis at UCL, argues that the financial crisis has shown the limitations of the prevailing economic paradigm, its over reliance on closed deductive modelling and its tendency to turn a blind eye to reality.

He claims that financial assets intrinsically create highly consequential emotional conflicts for those trading them, with major implications for market stability.

“Financial assets are abstract, they can easily increase or decrease; they are very influential on the state of mind, excitement at gain or panic at loss. And these states of mind can change even if the underlying facts don't change much. Once doubt is engaged, for example, reason falters – as in the current state of sovereign bond markets. For such reasons economics cannot continue to ignore uncertainty and emotion.”

Building on his previous study done at UCL as a 2006 Leverhulme Research Fellow, Professor Tuckett's project will use interviews with asset managers to develop further evidence for the role of emotion in everyday professional decision-making.

He will then explore, with selected UK regulators, pension funds and asset management groups, ways to influence policy to reduce the potentially dangerous influence of the inherent emotional conflicts they face.

INET, launched with a $50 million pledge from George Soros, aims to promote changes in economic theory and practice through research grants, task force groups, academic partnerships and conferences.

The grant program was developed in direct response to the 2008 financial crisis; it has been designed to encourage and support new economic thinking.

Professor Tuckett's new book, Minding the Markets: An Emotional Finance View of Financial Instability, will be published in New York and London by Palgrave Macmillan in June 2011.

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