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The Hour Between Dog and Wolf

John Coates

THE financial crisis of 2007-2008 was a perfect storm of greed and stupidity - and raging hormones may have been at its root. As neuroscientist John Coates argues in The Hour Between Dog and Wolf, hormones such as testosterone affect bankers' behaviour in ways that mean that financial boom and bust is almost unavoidable.

Turning to neuroscience after years as a trader with Goldman Sachs and Deutsche Bank, Coates has run experiments on the trading floor, documenting how traders' testosterone levels soar in winning times. Testosterone boosts aggression and self-confidence, aiding males in violent competition. But it also tempts traders and banking executives "puffed up with self-importance" to take ridiculous risks. Boom turns to bust.

Then it is time for hormonal hangover, as testosterone's cousin, cortisol, fills bankers with anxiety and a sense of imminent danger. After a crisis, Coates suggests, the financial industry becomes a "clinical population" of the psychologically battered, who shun even safe trades.

If Coates is right - and the evidence he presents is compelling - then the financial crises that so frequently plague capitalism find their roots in human biology, which amplifies both the euphoria of bubbles and the depression of their aftermath. What follows is a simple conclusion - less testosterone would make for stabler markets.

Time to castrate the bankers? The idea would probably receive widespread support, but Coates suggests another way - encourage more women and older men, and fewer young males, into the financial industry.

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