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Some Psychological Causes Of The Financial Crisis

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  • Paula-Elena DIACON

    () (Doctoral School of Economics and Business Administration, “Alexandru Ioan Cuza” University of Iasi, Romania)

Abstract

Besides the numerous effects that the financial crisis of 2007 has produced over the entire global economy, its onset has reopened fundamental discussions on the methodology of the economic science. One of the main controversies in the literature revolves around the nature of the neoclassical homo oeconomicus used in the mainstream analysis, with emphasis on the concept of rationality. Although the causes of the crisis are numerous, we propose to investigate in this paper only some aspects related to the psychological factors that contributed to the outbreak of this situation. The analysis is developed especially around the concept of economic rationality, arguing that the human being has a bounded rationality rather than a perfect one. Moreover, the relationship that exists between bounded rationality and the economic freedom of the individual is brought to the fore.

Suggested Citation

  • Paula-Elena DIACON, 2015. "Some Psychological Causes Of The Financial Crisis," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 7(2), pages 276-287, August.
  • Handle: RePEc:jes:wpaper:y:2015:v:7:i:2:p:276-287
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    File URL: http://ceswp.uaic.ro/articles/CESWP2015_VII2_DIA.pdf
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    References listed on IDEAS

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    1. Cass R. Sunstein & Richard H. Thaler, 2003. "Libertarian paternalism is not an oxymoron," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 48(Jun).
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    3. Glaeser, Edward L., 2006. "Paternalism and Psychology," Working Paper Series rwp06-006, Harvard University, John F. Kennedy School of Government.
    4. Tversky, Amos & Thaler, Richard H, 1990. "Anomalies: Preference Reversals," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 201-211, Spring.
    5. Bruce Ian Carlin & Simon Gervais & Gustavo Manso, 2013. "Libertarian Paternalism, Information Production, and Financial Decision Making," Review of Financial Studies, Society for Financial Studies, vol. 26(9), pages 2204-2228.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    financial crisis; bounded rationality; behavioural economics; liberalization;

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • G01 - Financial Economics - - General - - - Financial Crises

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