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Behavioral economics and the economics of Keynes

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  • Pech, Wesley
  • Milan, Marcelo

Abstract

The aim of this paper is two-fold: it first evaluates some of the psychological insights offered by Keynes in his economic theories, and secondly it weighs up these insights in the light of recent research in behavioral and experimental economics. We found that many of the psychological ideas set forth by Keynes in his economic works, especially in The General Theory, have a defensible behavioral foundation and fit broadly the actual behavior of economic agents in the real world as suggested by recent empirical evidence. As a consequence, we argue that Keynesian economics can benefit from this interaction, especially for issues related to judgment under uncertainty and building solid microfoundations for macroeconomics.

Suggested Citation

  • Pech, Wesley & Milan, Marcelo, 2009. "Behavioral economics and the economics of Keynes," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(6), pages 891-902, December.
  • Handle: RePEc:eee:soceco:v:38:y:2009:i:6:p:891-902
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:riibaf:v:42:y:2017:i:c:p:1478-1488 is not listed on IDEAS
    2. Roos, Michael W. M., 2015. "The macroeconomics of radical uncertainty," Ruhr Economic Papers 592, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. Benjamin Miranda Tabak & Dimas Mateus Fazio, 2010. "Ambiguity Aversion and Illusion of Control in an Emerging Market: Are Individuals Subject to Behavioral Biases?," Chapters,in: Handbook of Behavioral Finance, chapter 20 Edward Elgar Publishing.
    4. Gerasimos T. Soldatos & Erotokritos Varelas, 2015. "A first formal approach to animal spirits beyond uncertainty," European Journal of Government and Economics, Europa Grande, vol. 4(2), pages 104-117, December.

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