I recently tweeted:
When I was in financial markets I learned about the very plausible "perverse market theory" – the market acts to hurt the most people the most – draws the suckers in, then wipes them out, gives them hope, then tramples on them.
Many are going to get hurt.
— Ross Dawson (@rossdawson) December 8, 2017
I was later asked for more information about perverse market theory, and after digging around I have drawn a blank. The term “perverse market” is usually used to refer to unintended or unanticipated market responses, but that is a different meaning from the one I referred to here.
Perhaps my memory fails me on the concept’s name (let me know if you can instruct me on this!), but the idea really struck me when I heard about it in my early career working in financial markets.
Do markets want to hurt people?
The idea of perverse market theory essentially anthropomorphizes the markets, attributing it intent, not dissimilarly to how Kevin Kelly describes directional behaviors in the development of technology in his book What Technology Wants.