Mephistopheles from Cleveland

For the descendants of John Rockefeller was the real embodiment of the American dream. She started her career as a simple accountant, by the forty years he became the richest man in the world. Philanthropist, and a ruthless businessman, Rockefeller gathered in all the vices and virtues, which have existed in the wild America in the late XIX century. Now published in Research "is preparing to release a book of American author Howard Minza" Money and power. The history of business "dedicated to the history of the life of an entrepreneur. The material for the article kindly provided by IR "Analysis."

Reduce and conquer
From the age of sixteen, John Rockefeller was forced to earn his own living. However, salaried employees, he worked for three years - in the office of a Cleveland accountant trading firm. In 1858 John, together with a friend, opened a small grocery desk "and Clark Rockefeller." Cases partners were quite good, and the twenty-four years Rockefeller saved over 4000 dollars. For all the money he bought shares of refinery, built just outside of Cleveland. The first oil field in the world, opened in America seven years earlier, caused the country's present oil rush. This was akin to a frantic race for gold, which then tells not one generation of American writers. Do not resist, and the young John Rockefeller, kinuvshiysya to head the new business.

In 1870, he founded the Cleveland company, Standard Oil. However, according to the businessman, a registration clerk in the House, his firm became the twenty-sixth on account of oil company incorporated in the state. Cut-throat competition does not leave any chance to the entrepreneur.

While oil prices have changed with incredible speed. For example, a barrel of oil, stoivshy the morning of 13 dollars, in the evening to fall to 10 cents.

Penetrating into the subtleties of business, young entrepreneur realized that victory in the competition can only be achieved while reducing the cost of transporting oil from wells to a processing plant. At that time, all oil is produced in only one field and processed almost at the same plants with the same technology. Therefore, price advantage can only give lower transport costs. "Decide a transport puzzle in its favor - and you can conquer all of America!" For the Rockefeller Foundation has had such an opening force of the Holy Scriptures. He concluded a secret agreement with three state railways. "Standard Oil" had pledged to use only those three firms. In turn, the Rockefeller Foundation, the railroad promised to substantially reduce tariffs for the transportation of oil. Business has gone up the hill. While revenues grew entrepreneur enormous pace, its competitors began to gradually broke.

Scandalous fame
Although the contract was a secret, about him all the same soon pronyuhali leisurely journalists. Against diabolical John Rockefeller rebelled all American oil. Crowds of angry people with burning torches scrambled to destroy cars with the words "Standard Oil. Rockefeller, whose name has previously heard only the business people of his native city, trice became known throughout the country. Press called him except as Mephistopheles from Cleveland, and the riots of 1872 known as "Cleveland massacre." After just two months since the conclusion of a secret pact the court found the agreement illegal. But this time, John Rockefeller quite enough to buy a song for 22 of the 26 state oil companies. All of the first in a short period, he acquired 53 refineries, of which 32 were immediately closed, retaining only the most profitable.

During the massacre, "the businessman controlled 10% of U.S. refining industry. Ten years later, the share of Standard Oil "had already processed 90% of all the world's oil. It was then that John Rockefeller became a truly rich - the richest man of America.

Two dollars per second
A Rockefeller was the idea to close all the oil business itself: beginning with the oil and sell petroleum products to the consumer. He invented the first vertically integrated company.

Traditionally, oil is sold on the market by independent brokers that have earned five cents per gallon of kerosene. Rockefeller thought it unforgivable. He wanted to earn that money! "We had to create methods for sales, far surpassing that then existed," - he would say later. To get started, Rockefeller destroyed the independent oil dealers. In their place came supply units "Standard Oil.

By the end of the century company, Standard Oil controlled nearly all the refineries in countries that produce a third of the crude oil in America, owned the second largest steel manufacturer, and managed a fleet of thousands of rail cars, barges and ships. Its property is a lot of coal and iron mines. By the mid 90-ies of the Rockefeller Foundation, the company evolved into a fully vertically integrated oil company. Oil escape from the well "Standard Oil, traveled through the pipeline" Standard Oil, clear on refinery Standard Oil, shipped in the tank "Standard Oil" and even sold to the end consumer sales agent "Standard Oil. Control the entire production chain, Rockefeller is no longer dependent on any vendor, nor of the incompetent distributors of any other vagaries of the market. He reached the order.

Since then, the money in the pockets of millionaire polilis river. At a time when most Americans were at two dollars a day, Rockefeller earned nearly $ 2 per second - more than 50 million per year.

It managed to create a Rockefeller with the best management structure. Instead of trying to personally manage their business through fear, as did most big businesses, it has delegated some authority to managers. In the "Standard Oil" was even created specialized committees: the production and procurement. Now we are not aware of other governance structures, but a hundred years ago it was truly a brilliant invention. "By creating incomprehensible complexity of the empire, he was sufficiently clever to be able to dissolve their identity in the organization," - says Rockefeller biographer Ron Chernou. Specialist in business history, Alfred D., Jr. Chendler. Rockefeller called the invention of the creation of a new subspecies of economic rights - to the salaried manager. " According to the Brookings Institution, in the period from 1880 to 1920 the number of professional managers in the United States has more than six-fold - from 161 thousand to a million or more.

Charitable bribe
The famous rich man loved to observe, that to him and to his business law applied only to ex post facto. Secret railroad transaction that led to the massacre of Cleveland, in fact, become illegal only in 1887 when the Commission was established on interstate commerce. Combinations of restriction of trade, is a vital foundation of the vertically integrated companies have been recognized as illegal only after the adoption of the Sherman Antitrust Act in 1890.

In gathering material for a biography, Ron Chernou found in the correspondence Rockefeller numerous confirmed instances where the business simply to pay bribes to politicians to influence the outcome of legislative activity. 250 thousand dollars spent by the Rockefeller campaign McKinley in 1896, were only the most dramatic episode of the activities that Rockefeller saw as a necessary business expense. " Neither the Commission nor the antitrust act did not affect the ambitions of the entrepreneur. On the contrary, since this is the first he had to redouble their efforts to treatment of legal obstacles erected in front of Standard Oil. Rockefeller is constantly "buying" politicians, is simply not knowing how else can you have with them. He saw himself in the service of higher interests. For him, cleaning business was a matter of inefficiency, pleasing not only the economy but also the country, and God. But businessman underestimated the extent of public outrage.

May 15, 1911 the U.S. Supreme Court finished hearing Rockefeller, consisting of 23 volumes of testimony, totaling 12 thousand pages. At last, the eleventh-account process was caused by 444 witnesses, in the presence of which the Court ruled that Standard Oil was a monopoly and is subject to fragmentation.

The news caught Rockefeller playing golf. After carefully listening to the message, a great entrepreneur turned to its partners in the game and said: "I recommend that you immediately buy shares of Standard Oil." Perhaps it was the wise counsel, who ever gave Rockefeller, preferring to enjoy alone the fruits of their mind. As a result, Standard Oil was broken into 34 separate companies. But John Rockefeller has managed to retain control over each of them.

Subsequently, many of these firms grew in the industrial giants such as ExxonMobil, BP Amoco, Conoco, Inc., ARCO, BP America and Cheesebrough Ponds.

At the time of sentencing condition Rockefeller was estimated at approximately $ 300 million. Two years later, as a result of the execution of the penalty, that figure has tripled, to 900 million (equivalent to the current 13 billion U.S. dollars). For comparison: the entire federal budget in 1913 was only 715 million, while public debt was 1.2 billion dollars. The wealth of the Rockefeller Foundation has reached approximately 2.5% of gross national product, while the current state of Croesus Bill Gates is only one fifth of this figure. Lose antitrust process resulted in the greatest career success Rockefeller. In addition, it is time for a new market, the largest consumer of oil - the car.

Germ of laziness
Rockefeller once said that if it were not for charity, it would be three times richer. Indeed, the businessman handed out money to those in need with the same ease as they worked.

Contemporaries said that apparently John Rockefeller looked real curmudgeon. But it was impressive, he handed out to children dime-desyatitsentovye coins - has become a true legend. During his life, Rockefeller, and based his funds donated to charity more than 530 million dollars. One only has received from the University of Chicago, a famous entrepreneur of 35 million dollars.

Through its "Sanitary Commission," Rockefeller helped to destroy the South ankilistomidoz - the so-called "germ of laziness." One way to combat the disease has become a mere distribution of tens of thousands of pairs of shoes. The world's first organization devoted entirely to human health has been the Rockefeller Institute for Medical Research (now Rockefeller University).

Snake oil
In life, Rockefeller was a man of relentless controversy, almost all of whom were brought to absolute extremes. The philosopher William James once said that John Rockefeller - this is a very bad and very good man, whom he had ever seen. "This is a man deep in 10 tiers and completely incomprehensible to me - he wrote. - On the top surface of a seemingly perfect and integrity and all the accused that he was the biggest villain in the business ever created by our country."

From his mother Eliza Rockefeller inherited the best of human qualities: istovoe piety, moral austerity, frugality, hard work, self-discipline and social consciousness. But when civil war broke out, John for 300 dollars to buy from service in the army, because it was a true abolitionist. Moreover, he married a girl from a family whose members were conductors on the "underground railroad" and at one time hid in the house of the famous American abolitsionistku Sodzhorner coward.

Rockefeller's wife, Laura Spelman Ketty, with whom he lived for more than half a century, as Eliza, was the standard of piety. Over time, the family oil tycoon has four estates with beautiful trails for horseback riding and golf course for nine holes. But inside the house did not have any luxuries.

Even at home they had not lost in vain. John Rockefeller, Jr., their only son, once uttered, that until the age of eight was only women's clothing - obnoski sisters. Ketty and I were their own social aspirations. She founded the first school for freed black women's education - Spelman College in Atlanta.

But from his father, Rockefeller Senior inherited directly opposite tendencies, for example, the ability of low cunning and designing. William "Devil Bill" Rockefeller was the so-called "snake oil merchant" and dvoezhentsem. He traveled throughout the country, selling worthless medical medicine, and gave himself for it "botanical physician, for the" well-known expert in cancer ", in the impoverished deaf and dumb. Finally in 1855, Bill devil ever left the family, marrying at young girl who knew him as Dr. William Livingston. According to Ron Chernou, stepmother great entrepreneur Margaret Livingstone Elien only in recent years to learn that her husband was the father of the richest man in the world.

Sam, John Rockefeller of affairs more than once resorted to various tricks, and even threats. One day he told his wife that people succeed in life, must sometimes go against the current. "You can not fear that you bran hand - he said one of its competitors - but your body will suffer." When the threat fails, he falsified the transaction. When this did not help, he simply bought the people, their voices and support of the newspapers. One senator from Ohio, Rockefeller handed over 44 thousand dollars that he discredited the Attorney General of causing discomfort to the activities of Standard Oil.

Rockefeller was a man of tireless repetition. Every morning he was at the same time, play golf, chewed each piece ten times before you swallow, and rinse your mouth ten times each gulp of liquid. He possessed a great deal of willpower, and he seldom failed to get what is wanted. One of the goals of the Rockefeller Foundation was celebrating its 100 th birthday, and he nearly achieved it, died in 1937 at the age of 98 years.

Grand Dynasty
Son dvoezhentsa and devout Christian, Rockefeller gave birth to one of the most prominent and generous American families. John Rockefeller, Jr.. devoted his life to philanthropic and civil cases, giving to charity an additional 400 million dollars. To send a gift to the federal government, he bought land that later became the American National Parks Grand Teton and Acad. The grandchildren of the famous entrepreneur, too, played a big role in the history of their country. Nelson Rockefeller became governor of New York, has run for president from the Republican Party, then - the Vice-President of the United States. His brother Uintrop was governor of Arkansas and chairman of the board of Colonial Williamsburg, the basis of which the important role played by John Rockefeller, Jr.. Lawrence Rockefeller, a recognized defender of natural resources, the State donated the land for the creation of Virgin Islands National Park. John III was led by the Rockefeller Foundation, brought together one of the world's largest collections of Oriental art, and funded Linkolnovsky Center of Fine Arts, New York. And David Rockefeller was chairman of the bank Chase Manhattan, the head of the Council on Foreign Relations, as well as mainly due to the Museum of Modern Art - another project the Rockefeller family.

Now great-great-grandson of oil tycoon John D. IV - member of the Democratic Party and a third term as senator from West Virginia. A beautiful name for the future.



By Julia Tikhonova

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Nobel psihoekonomika

In 2002, the Nobel committee awarded the first prize for economics adherents of two opposing points of view. Vernon Smith experimentally proved that in a situation of massive purchases and sales team of people behave rationally limit. Daniel Kahneman et al confirmed the opposite point: the person is of conduct other than that attributed to it by the economic textbooks.

Experimental economics
The classical economic theory, taking its roots from Adam Smith, assumes that all people are selfish and their behavior is determined exclusively by personal gain. At the time, A. Smith, market players, whose behavior is defined by the cold rational logic, «homo economicus». The best minds of mankind good hundred years, under the influence of classical economic school and its concept of homo economicus.

Refute, like just check the rationality of economic agents could not be identified. And today's economy in many areas is a bezeksperimentalnuyu science, where researchers can not test the theoretical assumptions in the experiments. According to an authoritative professor at Harvard University Gregori Mankiw, whose textbook on macroeconomics translated into Russian, the absence of controlled experiment is the fundamental problem of all economic science. In a sense, the impossibility of conducting a controlled experiment brings together the economies of such sciences as astronomy and meteorology. Specialists have to rely on the so-called field data, the results of direct observation of the real world without the active intervention by the researcher. This depressing situation lasted quite a long time, while economists were not involved laboratory experiments. Under the influence of laboratory experimental economics has undergone a significant process in the last two decades of XX century. Controlled laboratory experiments have become an integral component of any full-scale economic research. Thanks to them, many of the theoretical postulates of the classical school have been refined or refuted. The process of change mainly affected two major areas: cognitive (cognitive) psychology, studying human thinking and decision making, and experimental economics, whose task is to verify theoretical models in research laboratories. The recognized leaders in both directions are Vernon Smith and Daniel Kahneman, by October 9, 2002 was awarded the Nobel Prize in economics.

Dossier

Vernon Smith (Vernon L. Smith)
Prizes awarded for the «use of laboratory experiments as a tool in empirical economic analysis, especially for the study of alternative market mechanisms».
Date of birth: 1927
Citizenship: USA
Current work: Interdisciplinary Center for Economic Science George Mason University (Interdisciplinary Center for Economic Science of George Mason University, USA)
Education:
• California Institute of Technology (1949),
• State University of Kansas (1951),
• Harvard University (1955).

Recent publications:
• Papers in Experimental Economics, December 1991;
• Bargaining and Market Behavior: Essays in Experimental Economics, June 2000;
• The Handbook of Experimental Economics by John H. Kagel (Editor), Alvin E. Roth (Editor);
• Paving Wall Street: Experimental Economics and the Quest for the Perfect Market by Ross M. Miller, Vernon L. Smith (Foreword), January 2002;
• Essays on Genetic Evolution and Economics by Terence C. Burnham, Edward O. Wilson (Editor), Adam M. Brandenburger (Editor), Vernon L. Smith.
Personal pages on the Internet:
1. http://www.gmu.edu/departments/economics/facultybios/smith.html
2. http://www.er.uqam.ca/nobel/d133140/first.htm
E-mail: vsmith2@gmu.edu


Seller and buyer in the «limit»
Early experiments carried out by economic science enthusiasts, are fully devoted to the audit of the basic theory. The first test was subjected to pricing in the classical models. Classical School of Economics argued that under conditions of perfect competition, market prices balance supply and demand at a level that the price offered «limit» buyer (marginal buyer), compared with the price «limit» seller (marginal seller). The first checks for the neoclassical theory of perfect competition has taken a well-known American economist Edward Chemberlin [1]. It was the beginning of the 1950's laboratory experiments have taken a great interest many future Nobel Prize winners for economics, for example, Reinhard Zelten, and John Nash. At the forefront of the experimenters was Vernon Smith. Encouraged by the ideas Chemberlina, Smith's teacher at Harvard, he organized a number of laboratory experiments with students. Smith set out to determine whether the hypothesis of perfect competition in practice. They used stochastic model, where buyers and sellers act with different ranges acceptable price for the goods. Ranges cover the spectrum from least to most acceptable commodity prices. Given the price distribution, Smith was able to determine the theoretical equilibrium price of the goods, ie price acceptable to the majority of buyers and sellers. The obtained results of laboratory experiments, they were first published in 1962 in the «Journal of Political Economy» [2]. To his considerable surprise, the prices obtained during the simulation, consistent with the prices, the theory predicted, although the actual experiment, participants did not have full information as required by neoclassical theory. In order to find out whether this is mere coincidence, Smith and several other researchers have repeatedly recheck the results of laboratory experiments. In 1978, during a better experiment, Vernon Smith, in collaboration with Charles Plottom obtained similar results, but his work, he summarized the caveat that market institutions «relevant» for pricing [3].

Types of auctions
Much time Vernon Smith gave the theory of auctions, which emerged at the intersection of microeconomics and game theory in the early 1960-ies. Virtually all of the theory of auctions has been established by William Vikram, a Nobel laureate in economics of 1996, but his work lay solely in the theoretical field. Really nobody knew what the results provide any types of auctions.

Meanwhile auction mechanisms play a key role in the markets of raw materials and financial instruments, where the specifics of trading systems directly affects the outcome of the tenders. In the 1990's. challenge the adequacy of the auctions came to the fore - in developing countries in connection with the transfer of state property into private hands, while in developed countries with regard to deregulation and privatization of television and radio. In the theory of auctions is allocated only four basic types of auction for the sale of one product or service.

1. Normal, or English auction (English auction): in an open disclosure of the price bid ends when none of the buyers do not want to increase the price of the goods. English auction can be seen in the sales of antique collections of trading houses such as Sotheby's.
2. Dutch auction (Dutch uction): if there is transparency in prices start from the maximum bid price bids, and ended with the issue of a minimum acceptable price. Dutch auction Orgbankom actively used until 1998, Bank deposits exhibited at an auction, where potential investors are gradually reduce interest rates until it was the only investor with the lowest rate offered.
3. Closed the first price auction (the first-price auction, with sealed bids): No public auction, each buyer only once anonymously offers a price, eventually wins the party with a maximum application. According to the scheme to sell the domestic industry in the collateral auctions in 1996-97 years.
4. Closed the second price auction (the sealed-bid second-price auction): an application filed under seal actors, and the one who proposed the highest bidder, must pay an amount equal to the second highest offer. Currently, such a specific type of auction is not widely used.

A Dutch-something cheaper
Enter a controlled experiment, Smith with his colleagues in the scientific arena began to find out the same whether the actual results of auctions with the theoretical predictions of the outcome of the tenders. He found that, like the theories, identical results show English auction and second price auction is closed. At the same time, Smith denied the suggestion that the outcome of bidding for the Dutch auction and the auction closes first price match. Ranzhiruya auctions in terms of maximizing the final price tender, Smith found that most prices are fixed in the English auction and second price auction closed. Second place is the first closed auction prices, and the last - Dutch auction.

Dossier

Daniel Kahneman (Daniel Kahneman)
Prizes awarded for the «work of combining psychological studies and economic science, especially for the study of human thinking and decision-making under uncertainty».
Date of birth: 1934
Nationality: dual, the U.S. and Israel
Current work: Faculty of Psychology, Princeton University (Princeton University, USA)
Education:
• Hebrew University of Jerusalem (1954),
• University of California at Berkeley (1961).

Recent publications:
• Choices, Values, and Frames by Daniel Kahneman (Editor), Amos Tversky (Editor);
• Heuristics and Biases: The Psychology of Intuitive Judgment by Thomas Gilovich (Editor), et al, July 2002;
• Well-Being: The Foundations of Hedonic Psychology by Daniel Kahneman (Editor) et al, July 1998;
• The Handbook of Experimental Economics by John H. Kagel (Editor), Alvin E. Roth (Editor);
• Judgment under Uncertainty: Heuristics and Biases by Daniel Kahneman (Editor) et al, April 1982.
Personal Page on the Internet:
http://www.princeton.edu/ ~ psych / PsychSite / fac_kahneman.html
E-mail: psych@princeton.edu

Smith Plottom conjunction with one of the first began to use «Progonnyj tunnel», or method of wind tunnel (wind tunnel), in laboratory experiments. Using the verified mechanisms lifting of state regulation, privatization and tendering for the procurement of goods for the state. At present, these mechanisms are so complex that modern theory is unable to give an accurate predictive assessment of the results. For this reason, the only possible solution to the problem of becoming a pilot method. Smith used the «Progonnyj tunnel» for constructing an optimal schedule of take-offs and landings at airports. Moreover, its recommendations on the results of the experiments were taken into account in the deregulation of electricity markets in Australia and New Zealand. It is regrettable that privatizatory of the Russian Federation State Committee on the eve of large-scale sales of state property has not been familiar with the writings of Vernon Smith.

Happiness is not about money, but their numbers
Modern economic theory at the center puts material wealth. The well-being, life satisfaction or happiness in the minds of economists are inextricably linked to material prosperity. The well-being or utility (utility), the individual is determined to consume goods and their quantity. To maximize the utility of an individual chooses a particular course of action in certain circumstances, which may be uncertain (uncertain).

Generally, the preferred course of action the individual is fully within the rational-logical patterns of human behavior. All these assumptions are the basis of expected utility theory of von Neumann-Morgenshteyna (Neumann-Morgenstern expectedutility theory) [4]. According to the individual making the greatest values of utility function, seeking to adequately assess the probability (expectation) of events with which it will face. As a psychology dominated by a view of human behavior. In the cognitive psychology of human beings as a system that deliberately encodes and interprets information available. At the same time, the decision-making process directly influenced by subconscious factors. Among the factors that determine the interactive process of human thinking, the number of perception, mental models of the interpretation of life situations, emotions, the nature of relationships between actors and the memories of the earlier decisions and their consequences.

Based on the extensive theoretical work and experiments on human behavior, Daniel Kahneman and several other psychologists have criticized the assumption of individual rationality that exists in economic science. According to critics, in fact, the individual ignores the evaluation of uncertainty according to the theory of probability. Moreover, it is far from maximizing the utility, which insists on the theory of von Neumann-Morgenshteyna.

A number of studies, Daniel Kahneman, in cooperation with other Israeli psychologists, Amos Tver, has shown that people are not able to fully analyze complex situations in which future events are hidden by fog of uncertainty. In the face of uncertainty, the individual relies on a short heuristic analysis (heuristics), or on a rule of thumb (rule-of-thumb).

The process of human thinking for example, studied a group of people who had to assess the probability of random events. Most participants in the experiment gives the same probability estimates both small and large events, without taking into account that with the increasing significance of the events likely to be reduced. In other words, people follow the law of small numbers (law of small numbers), completely ignoring the law of large numbers (law of large numbers), on which the theory of probability.

According to the law of large numbers of individual events are vulnerable to random and non-factor than the mass of phenomena in general. When a large number of observation random fluctuations are mutually canceled, and it becomes visible to the general pattern of phenomena.

However, in two experiments, psychologists have demonstrated, individuals sometimes paradoxical behavior. They believed that the probability of birth of a boy in a large urban and rural hospitals are equal and amount to 0.6.

Similarly, investors believe that the investment fund manager more competent than the market as a whole, if the fund shows its best financial results in comparison with the stock index over the past two years. Although the validity of statistical sampling (number of observations) is too small to make such conclusion.

Subjective perception of individuals of events in the real world allows you to explain the various irrational phenomena in financial markets. In particular, the assessment of market shares from the perspective of the law of small numbers of permits to explain the appearance of "bubbles". The use of psychological analysis of the financial markets eventually led to a theory of behavioral finance (behavioral finance) [5]. The most typical case of inadequate investor behavior can be illustrated by the following example. If the action is, the investor bought, rose in price from $ 20 to $ 50, then, fixing the profit he will sell it without thinking. However, if the price of first foam from $ 20 to $ 80, then dropped to $ 50, the investor with great displeasure give an order to sell.

Unexpected perspectives
Not satisfied with the standard theory of von Neumann-Morgenshteyna, Kahneman and Tver offered his own theory in his article "The theory of perspective: an analysis of decisions under conditions of risk" in one of the rooms authoritative magazine "Econometrics" [6]. According to the theory perspectives (prospect theory), individuals make decisions in two stages. First, they limit the problem to be solved by some framework to study it in isolation.

In other words, the issue is edited by comparison with its original, resulting in a complex problem is transformed into a simple perspective. Then, individuals maximize the value of the function of perspective (prospect value function). It is composed of different perspectives are assigned probabilistic weights, reflecting the psychological norms and expectations of the individual. In general, there are four key differences from the traditional theory of the prospects for utility theory.

"For the individual is important, not so much the absolute value of his wealth (or value of any other economic variable), but its relative change.
"The changes are evaluated in terms of losses and gains with respect to some reference point (reference point), and as a rule, the loss of re, and the acquisition of undervalued. As a result of this rejection of losses (loss aversion) is not so much an individual actually maximizes utility, but minimizes antipoleznost ( disutility).
"Deviations from the reference point perceived by the individual with lower sensitivity (diminishing sensitivity). A smaller variance is seen much more painful than a larger deviation.
"Probability weights assigned to different perspectives or upcoming deviations, are assigned to non-linear law. Most of the probabilities underestimated, but very low probabilities, on the contrary, overestimated.

In 1992, Tver and A. D. Kahneman expanded the original theory of perspective, bringing to light an aggregate theory perspectives (cumulative prospect theory) [7]. An updated version of the theory takes into account a number of shortcomings of early authors. First of all, it is designed to analyze a large number of prospects being faced by the individual, resulting in the offspring of two close to the standard theory of probability. Testing the theory perspectives in practice shows that individuals make mistakes in dealing with the problem of optimal allocation of resources, such as the formation of the equity portfolio. Rather than risk diversification, they "put all your eggs in one basket", ie concentrated risks.

The theory has been able to explain various behavioral anomalies: why do investors ignore the recommendations of the Portfolio Theory Markovitsa; why shoppers doing the long road to take advantage of small-scale discount stores, why the staff member in no hurry to reduce excessive consumption, etc. For answers to these and many other "why "Kahneman and was awarded the Nobel Prize.

Awarded the prize Vernon Smith and Daniel Kanemanu, adherents of the two opposing points of view, the Nobel Committee allowed the long-running dispute among scientists, as early as 1991, Smith blamed Kahneman and his colleagues in the one-sided and ignoring other concepts. Now, the collective behavior of individuals susceptible to the irrational rational explanation.

Sergey Moiseev

References:
1. Chamberlin E. H. An experimental imperfect market / / Journal of Political Economy, 1948, ? 56, pp. 95-108.
2. Smith V. L. An experimental study of competitive market behavior / / Journal of Political Economy, 1962, ? 70, pp. 111-137.
3. Plott C. and Smith V. L. An experimental examination of two exchange institutions / / Review of Economic Studies, 1978, ? 45, pp. 133-153.
4. von Neumann J. and Morgenstern O. Theory of Games and Economic Behavior. - Princeton: Princeton University Press, 1944.
5. Shleifer A. Inefficient Markets - An Introduction to Behavioral Finance. Clarendon Lectures in Economics. - Oxford: Oxford University Press, 2000.
6. Kahneman D. and Tversky A. Prospect theory: An analysis of decision under risk / / Econometrica, 1979, ? 47, pp. 263-291.
7. Tversky A. and Kahneman D. Advances in prospect theory: Cumulative representation under uncertainty / / Journal of Risk and Uncertainty, 1992, ? 5, pp. 297-323.

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