A psychosocial explanation of economic cycles
How human expectations and behaviors impact the economy has been of interest to economists since at least Adam Smith. However, recent advances in psychological and social psychological research have led to an improved level of knowledge about human adaptation processes, as well as about optimistic and pessimistic expectations and their consequences on human behavior. These developments allow us to understand these adaptive expectations and behaviors in a more integrated fashion. Based on these improvements, I develop a model of human adaptation under different external circumstances and apply it to explain the ups and downs of economic cycles. A central conclusion from the model is that optimistic expectations of economic agents might not always have a positive impact over the economy. I conclude by drawing theoretical implications, as well as potential consequences for financial and economic policy-making.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 40 (2011)
Issue (Month): 5 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/locate/inca/620175|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Thomas Mayer, 1987. "U. S. monetary policy," Proceedings, Federal Reserve Bank of San Francisco, pages 201-225.
- Anderson, Michael A. & Goldsmith, Arthur H., 1997. "Mr. Keynes' theory of investment: Do forward looking expectations and weight really matter?," Journal of Economic Psychology, Elsevier, vol. 18(5), pages 547-573, September.
- Katona, George, 1974. " Psychology and Consumer Economics," Journal of Consumer Research, Oxford University Press, vol. 1(1), pages 1-8, June.
- Grandmont, Jean-Michel, 1985.
"On Endogenous Competitive Business Cycles,"
Econometric Society, vol. 53(5), pages 995-1045, September.
- Swedberg, Richard, 1995. "Schumpeter's vision of socioeconomics," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 24(4), pages 525-544.
- Hillier, Brian & Rougier, Jonathan, 1999. "Real Business Cycles, Investment Finance, and Multiple Equilibria," Journal of Economic Theory, Elsevier, vol. 86(1), pages 100-122, May.
- Thaler, Richard, 1980. "Toward a positive theory of consumer choice," Journal of Economic Behavior & Organization, Elsevier, vol. 1(1), pages 39-60, March.
- Rosenberg, Nathan & Frischtak, Claudio R, 1983. "Long Waves and Economic Growth: A Critical Appraisal," American Economic Review, American Economic Association, vol. 73(2), pages 146-51, May.
- Kahneman, Daniel & Tversky, Amos, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Econometric Society, vol. 47(2), pages 263-91, March.
- Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
- George A. Akerlof, 2009. "How Human Psychology Drives the Economy and Why It Matters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1175-1175.
When requesting a correction, please mention this item's handle: RePEc:eee:soceco:v:40:y:2011:i:5:p:652-659. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.