Failing Institutions Are at the Core of the U.S. Financial Crisis
18 Pages Posted: 23 Oct 2012
Date Written: October 17, 2012
This paper uses the structure of institutional economics to provide an explanation of the recent U.S. financial crisis. Institutional theory suggests that a county’s political, legal, social, and cultural institutions determine and characterize its economy. An institutional perspective of financial crises therefore incorporates unquantifiable aspects of the real world. Different institutions interacted to ignite and fuel the global crisis. A thorough understanding of all of the legal, political, and cultural institution that encompass a society, as well as their role in the market, is needed to explain and avoid the reoccurrences of financial crises.
Keywords: Institutional Economics, Financial Crisis, Law and Economics, Interdependence, Behavioral Economics, Behavioral Finance, Hume, Veblen, Coase
JEL Classification: G01, B52
Suggested Citation: Suggested Citation