chapter  5
The global regulatory consequences of an irrational crisis: examining ‘animal spirits’ and ‘excessive exuberances’ as features of the financial system
Pages 18

There have been many explanations of the 2007-8 financial crisis and what to do about it. By and large these explanations have been offered by traditional economics, which despite its many failings in the run-up to the crisis has quickly recovered its analytical composure (despite the warnings from the likes of Krugman quoted above). The feature that most strikes the reader about these conventional accounts is the underlying assumption that the crisis can be both explained by – and put right with the aid of – the usual rationalistic assumptions of conventional economic analysis and policy-making (such as utility maximization, rational expectations and the efficient market thesis).1 From this perspective the crisis was just a random error. There are some exceptions to this, of course. The crisis has offered a space for rather unconventional approaches to be more seriously considered, giving these a voice they might not otherwise have had. The behaviourist school, for instance, has had a relatively ‘good crisis’ (Shiller 2000; Akerlof and Shiller 2009), and Keynes and Minsky are once again back in favour and on the intellectual radar (Cooper 2008; Davidson 2009; Minsky 2008; Skidelsky 2009), or so it seems.