|
on Post Keynesian Economics |
| By: | Tuckett, David |
| Abstract: | The author suggests the 2008 financial crisis was the culmination of an accelerating process of financial market evolution that is inherently unstable. From his viewpoint markets are not well organized to manage the power financial assets have to generate emotion and their wider effect on human imagination and judgement, anchored in neurobiology. Judgements and so decisions about risk, reward and the evaluation of success can become systematically compromised because the excitement of potential gain is disconnected from the anxiety of potential consequences; producing groupthink and bubbles. When anxiety breaks through a catastrophic loss of confidence is inevitable. In the aftermath the emotional pain of accepting responsibility prevents lessons being learned. The author´s theoretical framework is influenced by modern psychoanalysis drawing on an interview study of international fund managers in 2007. He suggests underlying psychological conflicts have influenced the way market institutions have evolved to compete by selling the promise of exceptional performance. To cope with the expectations upon them, agents are impelled to base their actions on stories which overvalue opportunities and underestimate risks; creating agency issues and facilitating the very process of disconnecting anxiety from excitement which creates bubble potential. Policy implications go well beyond improving regulation and transparency. |
| Keywords: | Financial bubbles,financial crises,group functioning,groupthink,market instability,financial regulation,psychoanalysis,psychology |
| JEL: | G18 G28 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:200937&r=pke |
| By: | Hasan, Lubna |
| Abstract: | What explains poverty of Sub Saharan Africa and South Asia? One view holds the disease environment of these regions as the primary culprit. Others see it as a typical symptom of growth retarding institutions. We test validity of these competing assertions for a cross section of countries. Our results indicate that institutions are the prime determinant of economic performance of countries. Disease does not play a significant role in determining outcomes. On the contrary, we find support for the indirect effect of disease via institutions, as asserted by the 'institutions school'. Interestingly, the 'institutions school' contention about geography having no direct effect on income is also not validated. Our results show that being land locked can pose significant disadvantage for a country. Endowment of hydrocarbon, however, is beneficial for economic outcomes. |
| Keywords: | Economic Performance; Institutions; Disease. |
| JEL: | O43 I10 |
| Date: | 2009–08–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:17090&r=pke |
| By: | Correani, L; Di Dio, F; Garofalo, G |
| Abstract: | In this paper, we analyze the role of cooperation between firms through a model of growth and social capital. In a growth model à la Solow we incorporate the set of resources that a relational network has at its disposals, as a distinct production factor, and thus examine its dissemination through evolutionary type processes in firm interactions. Dynamic analysis of the model demonstrates that cooperation is able to increase the productivity of factors, fostering a higher rate of growth in the long term. The most significant result is that scarcity of social capital can produce a general collapse of the economic system in areas in which long term growth is usually sustained by the learning by doing and spillover of knowledge phenomena. This conclusion leads to reconsider the role of local development economic policies that should concentrate on activities that promote repeated interaction between firms proven to be cooperative or that encourage the formation of technological consortia. |
| Keywords: | Economic growth; Social capital; Networks; Evolutionary games |
| JEL: | C71 O43 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:17043&r=pke |