The Socio-Political Theory of Crises (SPTC)

39 Pages Posted: 11 Aug 2021

See all articles by John Diamondopoulos

John Diamondopoulos

Macro Institute; Birkbeck, University of London

Date Written: August 9, 2021

Abstract

Crises are difficult to predict with the most recent and notable examples being the failure of the profession to see the 2007-2008 Credit Crunch. The failure of quantitative approaches to crises is due to the relative non-comparability of crises when using large-N methods that leave out context – social, political, and institutional. This led to a search for an alternative approach. The theory development research strategies of abduction/retroduction were used to develop a process-oriented theory of financial crises. The process of how a crisis unfolds happens through a 4-step macro-level process: Social, Trigger, Disruption and Psychological. Embedded within the Socio-Political Theory of Crises (SPTC) are three mechanisms: macro-level, disruption, and micro-level. This theory, which now has at its core the social, political, and institutional context, can be used to understand and to explain a variety of financial crises and to compare crises based on the process of how they unfold.

Keywords: Financial Crisis, Financial Crisis History, Theory, Macroeconomic Policy, Decision Making & Herd Behavior, Abduction/Retroduction Methodology

JEL Classification: G01, N2, E60, D81, B410

Suggested Citation

Diamondopoulos, John, The Socio-Political Theory of Crises (SPTC) (August 9, 2021). Available at SSRN: https://ssrn.com/abstract=3902103 or http://dx.doi.org/10.2139/ssrn.3902103

John Diamondopoulos (Contact Author)

Macro Institute ( email )

London
United Kingdom

HOME PAGE: http://macroinstitute.org

Birkbeck, University of London ( email )

London, WC1E 7HX
United Kingdom

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