Original source: SimoleonSense.com .
Additional examples of reflexivity? You decide.
Introduction (via Phys org)
Public attitude may be as important as public policy when it comes to the economy, according to UC Irvine’s Fabio Milani. A new economic model developed by the assistant professor of economics takes into account his finding that irrational optimism or pessimism is linked to a majority of booms and busts since the early 1970s.
Interesting Excerpt (via Phys Org)
“This quantitatively confirms what many have suspected – psychology is important for the economy and, sometimes, it can lead to self-fulfilling prophecies,” he says. On average, he says, it takes several quarters before the effects of these errors of unsubstantiated optimism or pessimism die off.
What does all this mean? For policy makers, he says, it points to a need for more proactive fiscal and monetary policy strategies.
“If you leave an economy open to market forces without intervention, it will be much more susceptible to these high levels of fluctuation that derive from psychological variables,” he says.
- Giving Content to Investor Sentiment: The Role of Media in the Stock Market
- The Applicability of the Austrian Theory of the Business Cycle for Analyzing and Interpreting the General Features of the Current Economic Crisis
- The Leverage Cycle (Worth Reading!)
- Does the Market Have a Mind of Its Own, and Does It Get Carried Away With Excess Cash?
Alphaverse.com uses this content with author’s permission purely for educational purposes. Go to the feed source of this article