"In a fascinating and innovative study, Coates and Herbert (2008) advance the notion that steroid feedback loops may help explain why male bankers behave irrationally when caught up in bubbles. These authors took samples of testosterone levels of 17 male traders on a typical London trading floor (which had 260 traders, only four of whom were female). They found that testosterone was significantly higher on days when traders made more than their daily one-month average profit and that higher levels of testosterone also led to greater profitability - presumably because of greater confidence and risk taking. The authors hypothesise that if raised testosterone were to persist for several weeks the elevated appetite for risk taking might have important behavioural consequences and that there might be cognitive implications as well; testosterone, they say, has receptors throughout the areas of the brain that neuro-economic research has identified as contributing to irrational financial decisions."Another blogger, (James Kwak at Baseline Scenario) zeroes in on the policy implications:
"Let's say you could provide reasonably convincing
evidence that you would get better long-term results by using a team that had an
even balance of men and women. Could you get away with an affirmative action
policy that instituted a quota for female traders? According to the Supreme
Court's extremely mushy and frustrating "intermediate scrutiny" standard for
gender discrimination, you would have to show that the policy is "substantially
related" to the achievement of "important governmental objectives." (I assume
that there's enough of a state-action component here, since we're dealing with
major, federally-regulated financial institutions.) Reducing systemic risk
sounds like an important objective to me."
Written and compiled by staff writers and editors, GOVERNING View is an on-the-ground, and sometimes behind-the-scenes, look at the topics we're covering in print and online. From notes on what's up in statehouses, county courthouses and city halls, to encounters with people, places and things, GOVERNING View is a window into the side of state and local government you don't always see.