The Causes Of Economic Crisis. A Behavioral Foundation
The cyclical path of economy is a common place in the economic theory. The economic crisis that started in 2007 was not only one of the most severe since the WWII but it came unexpectedly. The cause of the crises and of the surprise consists in the economic models and theories that were founded on the rationality and maximization behavior of the economic actor. People lack the rationality the mainstream economics assume. This is why both economists and simple people do not act as theory predicts and finally economy does not tend toward equilibrium but suffers recurrent crises. This crisis started as a financial one, because of the subprime loans made in USA, but have spread in production sector because of credit frozen, is now in transforming into a social crisis because of austerity measures taken by governments. The paper analyzes the theoretical foundation of economic theory and how the facts that characterize the recent economic evolution fit with the non mainstream theories. It presents the figures of the economic evolution in the last 3 years and explains them based of the agentâ€(tm)s behavior described by Herbert Simon and Daniel Kahneman. Their challenge of mainstream economics is based on an analyze of human behavior. Herbert Simon introduced the concept of bounded rationality as opposed to perfect rationality postulated by neoclassic economics and Daniel Kahneman realized experiments that proved that people cannot stick with the performances assumed by mainstream economics. Their conclusion permit to understand the approach of George Soros who says that people actions are bounded by reflexivity and as a consequences sometimes economy move not toward but far from equilibrium, creating bubbles that end in financial and economic crises. As Akerlof mention the cause of the crisis is the reliance of a false theory which said that we are safe. The conclusion is that we need new theories more close to the real life and an agent description that capture the limited characteristics of the human being despite the abstract â€œhomo oeconomicusâ€.
Volume (Year): 1 (2012)
Issue (Month): 1 (July)
|Contact details of provider:|| Postal: |
Fax: 004 0259 408409
Web page: http://anale.steconomiceuoradea.ro/
More information through EDIRC
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.:
- Arthur T. Denzau & Douglass C. North, 1993.
"Shared Mental Models: Ideologies and Institutions,"
When requesting a correction, please mention this item's handle: RePEc:ora:journl:v:1:y:2012:i:1:p:421-426. 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: (Catalin ZMOLE)
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.