8th April 2015

Challenging the smooth flow to calamity: how ethnic diversity deflates price bubbles

A forthcoming event that may be of interest to Charisma readers:

If there is one thing about which economists and sociologists agree, it is that friction is bad. Think of how often we hear of the importance of the “smooth flow of information.” The pop sociology version is “let’s all get together and iron out our differences.” But we know that friction is not always a bad thing. On a snowy, icy road no-one wants things to be smooth. Market bubbles are like that too smooth, icy road.

We are delighted to invite you to an LSE public lecture by David Stark. This event is sponsored by the Centre for Analysis of Risk and Regulation (CARR) in association with the Department of Accounting and the Department of Sociology and will take place on Thursday 7 May from 6.00pm-7.30pm at the London School of Economics and Political Science in room CLM 3.02, Clements House, Houghton Street, London, WC2A 2AE.

David Stark is Centennial Professor at the London School of Economics and the Arthur Lehman Professor of Sociology and International Affairs at Columbia University. He was named Guggenheim Fellow in 2002 and has been a visiting fellow at L’École des Hautes Études en Sciences Sociales in Paris; the Max Planck Institute for the Study of Societies in Cologne and many other centres for advanced study. He has published widely in sociology, including The Sense of Dissonance: Accounts of Worth in Economic Life, Princeton University Press 2009.

In this LSE public lecture Professor Stark will draw on results from a study that he and his colleagues designed to test the role of ethnic diversity in deflating prices bubbles. They created experimental markets where people versed in finance traded with other people for real money. The markets were identical except that some markets were ethnically homogenous and some were diverse. They found that ethnic homogeneity promotes conformity. Surrounded by people “like ourselves,” we can become overconfident in their judgements. We process information poorly. Ethnic diversity disrupts conformity. It leads to better information processing and less mispricing.

We do hope you will be able to attend what we are sure will be a most interesting and enjoyable event.


Martin Lodge and Andrea Mennicken

Professor Martin Lodge, Director CARR
Dr Andrea Mennicken, Deputy Director CARR