The Influence of Irrational Factors on Economic Development

Abstract:     
The main aim of this article is to illustrate the influence that the irrational human activities have on the macro economic development. We have in mind to explain the crucial role of this type of behaviors in shaping the cyclical sequence of boom and recession periods. This paper is also aiming to emphasize the importance of these factors generically called "animal spirits" in economic analysis. The paper stops at the analysis of some key sectors in any economy like financial market or real estate market showing, on one hand, their particular vulnerability to some irrational components of human behavior like the general level of confidence, and on the other hand, the macroeconomic consequences of these vulnerabilities. Although the analysis is mainly focused on the U.S. economy, the findings may be extended to other national economies too.

Number of Pages in PDF File: 11

Keywords: animal spirits, confidence, equity, corruption, recession, economic cycles, financial market, real estate market

JEL Classification: A11, E12, G12, G15, Z00

working papers series