Psychological Economics: The Case-Studies of Eurozone, Global Economic Crisis and Greece

Abstract

We showed what Economics owes to Psychology … in Microeconomics with utility and in Macroeconomics with the 4 propensities to consume, to save, to invest and to hold cash. Psychology is a science in-the-making, but par excellence essential in Keynes’ model. Keynes’ 3 independent variables — consumption, rate of interest and marginal efficiency of capital, are presented (in the appendix). We also derived a “demand curve” for goods, using “Pareto’s power law”. We showed (partly) Keynes’ microeconomics, something which many argued Keynes lacked. We took—in addition — the opportunity to use Hicks’ IS/LM curves. Moreover, we used the “Swan-Solow” diagram. These 3 diagrams helped us to present the situation in Eurozone, in our country Greece, and from the impact of the “Global financial crisis” (GFC) since end 2008, drawing on Temin & Vines [3] and … of course on Keynes [1] . We saw that emphasis in the quality of goods, which we consume, and in the proper attention to the environment, we live, was largely absent! Economists escaped from their half responsibilities by an alibi saying that: our science is “about what is” …