Major Edinburgh event to look at how to avoid a financial crash

Some of the biggest names in economics and investing are taking part in a major conference being staged in Edinburgh this week to debate how to avoid a future financial crash.

The event is being held to discuss a new theory that builds on the work of Adam Smith and which aims to take a different approach to economics.

The “Market Mind Hypothesis” has been developed by a Heriot-Watt University professor to combine economics, investing and discoveries in cognitive science. The approach looks to develop insights that can improve markets, make investing more sustainable, increase the effectiveness of public policy and ultimately benefit society.

The theory, developed by Professor Patrick Schotanus, is based on the idea that a market develops a collective mind of its own – something referred to among investors as the “market mind”.

“The Market Mind Hypothesis can help us all better understand why markets act the way they do – why they fall when they shouldn't, and why they climb for no good reason,” explained Schotanus.

He argues the theory could help avoid some of the excesses of markets – both bubbles and crashes — that have occurred over the years.

The conference aims to renew interest in Smith's broadest thinking and to promote Scotland as a centre of financial thought.

“It will place Scotland firmly at the centre of modern economic thinking and ensure our universities continue to drive research in this important field,” said Schotanus.

The conference is being staged at Panmure House in Edinburgh which is the only remaining residence of Adam Smith, the father of economics.

Schotanus said the event was particularly relevant with previously buoyant markets now facing challenges from a number of directions including rising interest rates, central bank activity and fears related to the war in Ukraine.

Speakers at the event, being staged on Monday and Tuesday, include renowned economists Anatole Kaletsky and John Kay, distinguished neuroscientists Karl Friston and Scott Kelso, leading philosophers Julian Kiverstein and Duncan Pritchard, as well as legendary investors Howard Marks and Kiril Sokoloff.

The event is being staged at Panmure House, the last remaining residence of Adam Smith where the man known as the father of economics, completed the final editions of his famous books The Theory of Moral Sentiments and The Wealth of Nations between 1778 and 1790.

In 2008, Edinburgh Business School undertook to rescue the historic building from dereliction. Following a 10-year £5.6 million renovation, Panmure House was formally opened in November 2018. It now operates as a research and event centre.

Schotanus is a visiting professor at the Edinburgh Business School at Heriot-Watt University where he is working on further development of his hypothesis together with other researchers. He previously worked in investment management and banking in Edinburgh, London, New York, Singapore, and the Netherlands, most recently as global multi-asset strategist and portfolio manager. He has a PhD and two master’s degrees, one from UC Berkeley where he was a member of its Master in Financial Engineering (MFE) programme.

The conference is the latest step in a programme of work to promote Market Mind Hypothesis. A pilot project received a research award from the Edinburgh Futures Institute (EFI) in 2019.