Monday, April 07, 2014

The financial crisis and its effects: Perspectives from economics and psychology

Short communication by Greenglass et al in the Journal of Behavioural and Experimental Economics. The conclusion is below:
Countries across the globe vary in the extent to which they have been affected by the recent financial crisis. There was a consensus among the panelists that despite signs of economic recovery, income inequality remains a concern. The benefits of economic growth flow largely to the already wealthy. Economic recovery cannot occur until an economy can generate more paying jobs, and with them, increased consumer confidence and spending. Austerity programs implemented by many governments worldwide to cope with the financial crisis have had the opposite effect, namely to reduce jobs and correspondingly to reduce consumer confidence and spending by individuals and governments alike. The economically deleterious and psychologically harmful effects of unemployment are a distinct concern, particularly for many youth of our day. As youth unemployment is often double the national average today in many countries, there are associated economic, social and psychological issues. These can lead to widespread suffering in the short term and may have negative long-term effects on a societal level. The longer these levels of unemployment persist, the more difficult it will be for countries to manage societal discontent. The panel discussion summarized here highlights the importance of bringing together psychologists and economists to study and analyze the financial crisis and its effects.

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