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Annual Review of Financial Economics

Volume 14, 2022

Kindleberger Cycles: Method in the Madness of Crowds?

Abstract

Corporate R&D has a social return far above its internal rate of return to the innovating corporation, and so it is chronically underfunded from a social perspective. Kindleberger cycles, irregularly recurring stock market manias, panics, and crashes that are prominent in financial history, are also a major problem for mainstream economics. If manias inundating hot new technologies with capital sufficiently counter chronic underinvestment in innovation, economy-level selection may favor institutions and behavioral norms conducive to Kindleberger cycles despite individual agents’ losses in panics and crashes.

Keyword(s): behavioral finance, evolutionary economics, government failure, growth-enhancing bubbles, intellectual property rights, investment manias, JEL G01, JEL G02, JEL G4, JEL N2, JEL O16, JEL O3, JEL O33, JEL O4, JEL P1, market failure, productivity growth, R&D spillovers
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2022-11-01
2024-05-23
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/content/journals/10.1146/annurev-financial-101821-115140
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Kindleberger Cycles: Method in the Madness of Crowds?
Annual Review of Financial Economics 14, 563 (2022); https://doi.org/10.1146/annurev-financial-101821-115140
/content/journals/10.1146/annurev-financial-101821-115140
/content/journals/10.1146/annurev-financial-101821-115140
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