AN ECONOMIC APPROACH RECONSIDERED: BEHAVIOURAL ECONOMICS. HOW WE CAN AVOID ANOTHER CRISIS IN THE FUTURE? HOW CAN WE MANAGE THE CURRENT CRISIS?

Alina Stefania Chenic (cretu) (), Silvia Mărginean (), Adrian Miron () and Speranta Pîrciog ()
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Alina Stefania Chenic (cretu): Academy of Economic Studies, Bucharest, Romania
Adrian Miron: University of Medicine and Pharmacy “Carol Davila”, Bucharest
Speranta Pîrciog: INCSMPS Scientific Director, Bucharest, Romania

Annals - Economic and Administrative Series -, 2013, vol. 7, issue 1, 3-22

Abstract: One of the famous and sarcastic "Laws of Murphy" says: "when things go too well, it means that something is wrong!" This happened until the years 2007-2008 – spectacular economic growth, some of which seemed highly unlikely – even if sometimes well-being seemed suspicious and somewhat incomprehensible to many of us! So after almost 80 years since the "Great Depression" of 1929-1933, the civilized world faces a new – carbon copy – crisis but in terms of incomparable globalization of the economy. We rightly ask ourselves: "Why study economics if – with some notable exceptions – the academic elite has not strongly warned us about this danger, especially if, once triggered, this crisis can no longer be controlled and stabilized?" Probably – many economists now say, especially supporters of emerging sectors of the economy, namely behavioural economics – classical economics, although perfectly constructed, conceptually speaking, overlook an element of detail that is absolutely essential. Namely that economics is an exact science but also a social science, not a material one, that addresses men. Their imperfection in all areas, including the economic life, makes them vulnerable and frequently irrational. Such economic behaviour – irrational, yet predictable – makes the entire logical structure of the economy give in shamefully. Economics should take into account the actual patterns of human behaviour in the decision-making system in the economic and financial life, not ideal patterns. Based on these considerations, we must understand as precisely and profoundly as possible the actual decision-making system in the human brain in general and especially the human decision-making system in the economic and financial area; area which is of maximum interest and sensitivity. Almost any careful and thorough analysis we make, we find the presence of irrational decisions in individuals and human communities, especially long-term and/or global decisions. Therefore it would be good to understand and explain the actual mechanisms that can lead to very serious – sometimes catastrophic – macro economic disturbances, how to recognize and how to avoid them!

Keywords: classical economics; behavioural economics; economic behaviour; economic and financial crisis; rational/irrational human behaviour (search for similar items in EconPapers)
Date: 2013
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