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Why Convention Dominates Pension Fund Trustee Investment Decisionmaking

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  • G L Clark

    (School of Geography, St Peter's College and University of Oxford, Mansfield Road, Oxford 0X1 3TB, England)

Abstract

Pension funds may be one of the few avenues now open for financing new urban infrastructure and development projects. But convention dominates pension fund trustees' investment decisions, so it is difficult to see how the ambitions of advocates of pension fund investment can be squared with trustees' behaviour. The question is: why does convention dominate? Drawing on previously reported interviews and case studies, I propose a framework through which to understand the dominance of convention. In doing so, I identify a set of behavioural traits that structure decisions. This framework is inspired by the contributions of Kahneman and Tversky and their colleagues for understanding the economic psychology of individual decisionmaking. The paper is intended to be a realistic account of the attributes of trustee decisionmaking, recognising the ingrained and systematic nature of the identified habits, rules, and norms. The paper is also inspired by Keynes's work on risk and uncertainty. In combination, I assess the potential for investment innovation by pension fund trustees, noting the importance of analogical reasoning in extending the range of pension funds investments. The paper closes with a comparison of the proposed framework with standard treatments of decisionmaking, including reference to the robustness of psychological models of habit.

Suggested Citation

  • G L Clark, 1998. "Why Convention Dominates Pension Fund Trustee Investment Decisionmaking," Environment and Planning A, , vol. 30(6), pages 997-1015, June.
    • Handle: RePEc:sae:envira:v:30:y:1998:i:6:p:997-1015
    DOI: 10.1068/a300997
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    References listed on IDEAS

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    1. Daniel Kahneman & Dan Lovallo, 1993. "Timid Choices and Bold Forecasts: A Cognitive Perspective on Risk Taking," Management Science, INFORMS, vol. 39(1), pages 17-31, January.
    2. Houthakker, Hendrik S. & Williamson, Peter J., 1996. "The Economics of Financial Markets," OUP Catalogue, Oxford University Press, number 9780195044072.
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    Cited by:

    1. Joe Doak & Nikos Karadimitriou, 2007. "(Re)development, Complexity and Networks: A Framework for Research," Urban Studies, Urban Studies Journal Limited, vol. 44(2), pages 209-229, February.
    2. Joe Doak & Nikos Karadimitriou, 2004. "Land Re-Use, Complexity And Actor-Networks: A Framework For Research," Real Estate & Planning Working Papers rep-wp2004-09, Henley Business School, University of Reading.
    3. van Dalen, H.P. & Henkens, K. & Koedijk, C.G. & Slager, A.M.H., 2010. "Decision Making in the Pension Fund Board Room : An Experiment with Dutch Pension Fund Trustees," Discussion Paper 2010-18, Tilburg University, Center for Economic Research.

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