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Kindleberger Cycles: Method in the Madness of Crowds?

Author

Listed:
  • Randall Morck

    (Alberta School of Business, University of Alberta, Edmonton, Canada)

Abstract

Corporate R&D has a social return far above its internal rate of return to the innovating corporation, and so it is chronically underfunded from a social perspective. Kindleberger cycles, irregularly recurring stock market manias, panics, and crashes that are prominent in financial history, are also a major problem for mainstream economics. If manias inundating hot new technologies with capital sufficiently counter chronic underinvestment in innovation, economy-level selection may favor institutions and behavioral norms conducive to Kindleberger cycles despite individual agents’ losses in panics and crashes.

Suggested Citation

  • Randall Morck, 2022. "Kindleberger Cycles: Method in the Madness of Crowds?," Annual Review of Financial Economics, Annual Reviews, vol. 14(1), pages 563-585, November.
    • Handle: RePEc:anr:refeco:v:14:y:2022:p:563-585
    DOI: 10.1146/annurev-financial-101821-115140
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    More about this item

    Keywords

    behavioral finance; evolutionary economics; government failure; growth-enhancing bubbles; intellectual property rights; investment manias; market failure; productivity growth; R&D spillovers;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G4 - Financial Economics - - Behavioral Finance
    • N2 - Economic History - - Financial Markets and Institutions
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • P1 - Political Economy and Comparative Economic Systems - - Capitalist Economies

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