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Behavioral finance and Post Keynesian-institutionalist theories of financial markets

Author

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  • J. Patrick Raines
  • Charles G. Leathers

Abstract

The author of a paper in a previous issue of Journal of Post Keynesian Economics suggested that developments in behavioral finance might lead Post Keynesian economists to a new "general theory of financial behavior." We note that Post Keynesian-Institutionalist theories of financial markets have provided a "general theory" that has been repeatedly validated by recent real-world events from the stock market bubble and crash of 1987 to the current global financial crisis. After reviewing the psychological and institutional behavioral foundations of the Post Keynesian-Institutionalist theories that are rooted in the analyses of John Maynard Keynes, Paul Davidson, and John Kenneth Galbraith, we explain why developments in behavioral finance appear to have limited potential for making substantive contributions to those behavioral foundations.

Suggested Citation

  • J. Patrick Raines & Charles G. Leathers, 2011. "Behavioral finance and Post Keynesian-institutionalist theories of financial markets," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 33(4), pages 539-554, July.
    • Handle: RePEc:mes:postke:v:33:y:2011:i:4:p:539-554
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    Citations

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    Cited by:

    1. Eduardo Fernández-Huerga & Ana Pardo & Ana Salvador, 2023. "Compatibility and complementarity between institutional and post-Keynesian economics: a literature review with a particular focus on methodology," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 40(2), pages 413-443, July.
    2. John E. King, 2013. "Should post-Keynesians make a behavioural turn?," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 10(2), pages 231-242.

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