Failing Institutions Are at the Core of the U.S. Financial Crisis

18 Pages Posted: 23 Oct 2012

See all articles by Yochanan Shachmurove

Yochanan Shachmurove

City University of New York, CUNY City College of New York - Department of Economics; The University of Pennsylvania - Department of Economics

Date Written: October 17, 2012

Abstract

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

Shachmurove, Yochanan, Failing Institutions Are at the Core of the U.S. Financial Crisis (October 17, 2012). PIER Working Paper No. 12-040, Available at SSRN: https://ssrn.com/abstract=2165338 or http://dx.doi.org/10.2139/ssrn.2165338

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City University of New York, CUNY City College of New York - Department of Economics ( email )

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