“Psychology (evolutionary or otherwise) seems to be merging with economics already”
Yes, and that’s unfortunate because emotion is not all that important to understanding the business cycle. There is a perfectly good explanation that shows that an economy made of quite rational agents [in the economic sense] will generate the business cycle. Not only does it explain the cycle itself but particular aspects of the cycle.
Emotive economic theories are not new. To believe that the business cycle is due to “animal spirits” like Keynes did is wrong and will lead to bad solutions. It’s like believing that loosing altitude on your plane is due to gremlins on the underbelly weighing it down and therefore the best way to deal with it is to rub them off by flying even lower over some trees.
We’ve set up an economic system that is based on a banking pyramid scheme and of course people become excited as they falsely believe they are raking in real earning based on asset appreciation. Then of course they get upset and panic with the fraud becomes apparent later. Those are effects, not causes.
I wouldn’t mind moving on to the emotional aspects of the business cycle if they were recognized for what they are, effects not causes. Also if there was an understanding that rational in the economic sense and emotive in the psychological sense are orthogonal concepts. One can be a rational economic actor and be emotive also. I really don’t see how there is much difference in behavior between an rational non-emotive actor and a rational emotive actor in the economy and in response to the business cycle.
After all it is rational to buy stocks as they rise and sell them as they fall. It is rational to respond to the government setting interest rates below market by borrowing.
One thing about rational actors is that the are not presumed omniscient. They can be tricked by sophisticated pyramid schemes like fractional reserve banking. In fact it’s such a sophisticated scheme that most economists, let alone most people, don’t recognize how it is fraudulent, and why it leads to boom then bust.
BTW, in the economic sense the non-rational actors are what we would call the insane. The term rational actor is suppose to cover every sane person.
“Psychology (evolutionary or otherwise) seems to be merging with economics already”
Yes, and that’s unfortunate because emotion is not all that important to understanding the business cycle. There is a perfectly good explanation that shows that an economy made of quite rational agents [in the economic sense] will generate the business cycle. Not only does it explain the cycle itself but particular aspects of the cycle.
Emotive economic theories are not new. To believe that the business cycle is due to “animal spirits” like Keynes did is wrong and will lead to bad solutions. It’s like believing that loosing altitude on your plane is due to gremlins on the underbelly weighing it down and therefore the best way to deal with it is to rub them off by flying even lower over some trees.
We’ve set up an economic system that is based on a banking pyramid scheme and of course people become excited as they falsely believe they are raking in real earning based on asset appreciation. Then of course they get upset and panic with the fraud becomes apparent later. Those are effects, not causes.
I wouldn’t mind moving on to the emotional aspects of the business cycle if they were recognized for what they are, effects not causes. Also if there was an understanding that rational in the economic sense and emotive in the psychological sense are orthogonal concepts. One can be a rational economic actor and be emotive also. I really don’t see how there is much difference in behavior between an rational non-emotive actor and a rational emotive actor in the economy and in response to the business cycle.
After all it is rational to buy stocks as they rise and sell them as they fall. It is rational to respond to the government setting interest rates below market by borrowing.
One thing about rational actors is that the are not presumed omniscient. They can be tricked by sophisticated pyramid schemes like fractional reserve banking. In fact it’s such a sophisticated scheme that most economists, let alone most people, don’t recognize how it is fraudulent, and why it leads to boom then bust.
BTW, in the economic sense the non-rational actors are what we would call the insane. The term rational actor is suppose to cover every sane person.