Need Not Greed: Bonuses, Risk–Taking And Evolution
What to do with those 'greedy' bankers
In the wake of the most recent financial crisis, financial regulatory bodies across the world have sought ways to curb the excessive risk–taking of bankers. Most often, this is done by capping bonuses and developing clawback policies (Gray, 2016). Such decisions are based on the widespread view that financial incentives are a factor for risk–taking. That the potential to earn large personal payoffs is so attractive that many individuals are willing to take excessive risks in order to earn them. This is the classical 'homo–economicus' view of human behavior, where people are considered rational actors, motivated to maximize personal utility for reasons of self–interest (Aktipis & Kurzban, 2004; Thaler, 2000). In other words, be greedy.
But…. what if bankers didn’t take risks to earn their bonuses for reasons of greed, but for reasons of need?
References
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About the Author
Belinda Vigors
Belinda is a PhD Candidate at the University of Greenwich, London. She studies decision–making under risk and uncertainty and believes that insights from evolutionary psychology can help improve our understanding of what influences risk–taking. She is particularly interested in applying evolutionary psychology to improve the decision–making of investors and financial traders.
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