The financial crisis: Lessons for Europe from psychology
2011 (English)Report (Other academic)
It is discussed how psychology can shed light on the recent global financial crisis. Financial behavior on an individual and collective level, respectively, is analyzed. On the individual level four modes of cognitive function are highlighted: Adaptive intuitive, maladaptive intuitive, adaptive analytic, and maladaptive analytic. The development of the crisis on a collective level is analyzed in terms of the concepts of shared reality, group think, destruction of trust, and restoring trust by verbal communication. A case study is reported showing biases in forecasts of economic growth. The report concludes that future crises could be counteracted by stimulating a positive spiral in which people develop their own thoughts, feelings and behavior by influencing and being influenced by the economic environment. This goal cannot be attained by regulation alone. To attain this end, a number of policy measures are recommended.
Place, publisher, year, edition, pages
Stockholm: Swedish Institute for European Policy Studies , 2011. , 104 p.
, SIEPS Reports, ISSN 1651–8942 ; 2011:1
financial crisis, psychology, decision making
Research subject Psychology
IdentifiersURN: urn:nbn:se:su:diva-70556ISBN: 978–91–86107–23–9OAI: oai:DiVA.org:su-70556DiVA: diva2:481998
ProjectsLångsiktiga effekter av den ekonomiska krisen
I would like to thank Ulrika Stavlöt, Tommy Gärling and one anonymous reviewer for their constructive comments on a previous version of this report. A large part of the report was written when I was a visiting scholar at the Swedish Institute in Paris. The peaceful atmosphere at the Institute as well as the kind support from the staff was a perfect environment for working on this report.2012-01-232012-01-232012-08-10Bibliographically approved