Andy Haldane, the Bank of England's Chief Economist, gave a really thoughtful speech a few days ago on central bank psychology. He highlighted four "cognitive ticks" that affect human decision making and public policy making - preference biases, myopia biases, hubris biases and group-think biases. In his speech, he outlined ways in which the Bank has been organised to take account of these cognitive ticks. His speech is well worth reading.
My colleague and former PhD student Gareth Campbell has created a website about the British Railway Mania - click here . This episode has been described by the Economist as probably the greatest bubble in human history. Gareth's website provides background on the Mania and posits some explanations for the 'bubble'. In his explanation of why the bubble happened, Gareth places a lot of emphasis on investor myopia regarding future dividends and uncalled capital. His study of investors during the episode does not support the view that this episode was fuelled by naive and irrational investors.