Endogenous Crisis and the Economic Paradigm
Real-World Economics Review, Issue 59, pp. 67-82, March 12, 2012
16 Pages Posted: 15 Mar 2012
Date Written: February 24, 2012
This paper proposes that the global financial and economic crisis has a single cause underlying all other causes. The single cause is attributed to the economic paradigm which drives individual behaviour, business, government and education. We define the economic paradigm and explain its power to drive endogenous economic processes, ultimately leading to the course of events which is recognised as the crisis. The paradigm assumes that economic instabilities are exogenous events thus allowing governments to ignore processes with systemic risks which emerged from excessive debt and asset bubbles. We suggest that the solution to this and future crises requires a new economic paradigm, where understanding endogenous crisis is one of its central objectives. Economic theory without crises is like medical theory without diseases.
Keywords: endogenous, crisis, instability, cause, paradigm
JEL Classification: A2, B4, D5, D8, E1, G1, H1, P1
Suggested Citation: Suggested Citation