The similarities between mankind’s innate tendency to behave irrationally in markets and neurosis always astounds me.
Mowrer nails it here some 60+ years ago in his discussion of the neurotic paradox, 30 years before Prospect Theory was published…
Most simply formulated, it is a paradox – the paradox of behavior which is at one and the same time self-perpetuating and self-defeating! …Common sense holds that a normal, sensible man, or even a beast to the limits of his intelligence, will weigh and balance the consequences of his acts: if the net effect is favorable, the action producing it will be perpetuated; and if the net effect is unfavorable, the action producing it will be inhibited, abandoned. In neurosis, however, one sees actions which have predominantly unfavorable consequences; yet they persist over a period of months, years, or a lifetime.
-O.H. Mowrer