[ExI] Psychology of markets explanations/was Re: More on Health Costs

[Stathis Papaioannou]

2009/5/29  <dan_ust at yahoo.com>:

>> And if they had the right mindset, they wouldn't allow
>> another bubble to form either.
>> If population, natural resources and new technology are
>> kept constant,
>> psychology is the one thing left that contributes to the
>> economic
>> cycle.
>
> Psychological explanations of recession go back a long way -- and always rise up again, despite being refuted.  This is like the view of gambler who's down to his last stack thinking that if he only just thinks positive, he'll win.  His false optimism will likely get him deeper losses.

I wasn't referring to anything so crude as "think positive". In the
most basic terms, economics reduces to physical resources and human
psychology. Capital, interest rates, the price of commodities etc. are
not physical objects, but ideas that influence behaviour. Consider it
as a physics problem: you want to get from situation A, which is a
recession, to situation B, which is a boom. If it's physically
possible with the resources available, then the problem is how to get
all the parts in A moving in such a way as to bring about B. Getting
the parts moving in the right way means controlling the behaviour of
the humans who move the other parts, and behaviour is determined by
psychology.


-- 
Stathis Papaioannou