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Academy of Behavioral Finance and Economics, 5th Annual Meeting, Chicago 2013 – presentation cancelled!

May 18, 2013

 

5th Annual Meeting of the Academy

Co-sponsored By: DePaul University      

September 17-20, Chicago, IL, USA

BEHAVIORAL ECONOMICS: STIMULUS OR AUSTERITY? (cancelled)

Elior Kinarthy PhD (emeritus), Rio Hondo College, California

Abstract

This paper will show that implementing a stimulus package based on appropriate behavioral studies will expand economic recovery and reduce budget deficits. 

From the perspective of behavioral economics, there are two main psychological reactions to recessions and other adverse financial conditions. One reaction is the rational tendency to reduce spending and “tighten the belt” within an existing economic structure and the other behavior is to change the current financial structure and stimulate economic growth. 

Logical thinking and common sense support the rational of austerity programs. Decisions are made on the basis of the untested hypothesis that in the short-term austerity measures will reduce the risk of financial collapse. The response to a financial crisis stems from the psychological attitudes of government officials and their economic advisers. Austerity measures are often based on the fear of the consequences of a monetary default. There is little psychological consideration given to the human personality and behavior in the decision-making process. Government policy does not tend to rely on research or behavioral studies to verify its reactions to an economic crisis.

The stimulus response to trade and industry recessions is both psychological and economical as it is based on verifiable research. The studies of Kahneman, Thaler, Sunstein, Krugman and other behavioral scientists show the psychological strengths and weaknesses in implementing a stimulus package. Research confirms that the role of government in a financial downturn is to stimulate wealth-creating jobs in infrastructure and education in order to reduce unemployment.  Austerity programs are needed only when a society fails to organize itself over and over again.

Revised presentation: Full paper of this presentation may not be available at the 5th Annual Meeting in Chicago since my Abstract has not been approved by the committee. I feel that the issue of austerity vs. stimulus approach in economic recovery is so important that I am sending a similar abstract to an Italian University next month. I will post the results of that attempt  for the benefit of interested researchers, respectable journals, professors or universities who are looking for a fundamental change in economic policy. All rights reserved.

 

 

 

 

 

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One Comment leave one →
  1. July 27, 2013 2:52 pm

    Academy of Behavioral Finance and Economics, 5th Annual Meeting, Chicago 2013 | The Psychology of Investing

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