Lunchtime Must-Read: Justin Fox: Andy Haldane: The Regulator Who Explained the World

…a framework in economic theory, references to the latest in empirical research, grand historical sweep, and crystal-clear explanation… [plus] the subversive element found in the best of Haldane’s work…. His Sept. 2, 2010 speech “Patience and Finance”… bowled over by how good it was….

Under one equilibrium, patience wins the day. When long-term investors start in the ascendency, prices tend to correct towards fundamentals. The performance of untested investors pursuing momentum strategies falters, while those pursuing longterm strategies flourish. The fraction of long-term investors rises. The self-correcting tendencies of market prices are thus reinforced, further supporting long-term investors. The patience gene thrives, the impatience gene dies. Natural selection results in a self-improving cycle, as with dieting, happiness and exercise. But there is a second equilibrium where this cycle operates in reverse gear…. Natural selection results in a self-destructive cycle….

Haldane then goes on to meticulously document the ways that, over the past decade, financial markets–especially in the U.S. and UK–succumbed to the impatience cycle…. Another Haldane speech ‘The Short Long’… ‘Control Rights (and Wrongs)’…. As somebody who has long trafficked in explanatory financial journalism, I stand somewhat in awe…