The theoretical association between behavioral economics and investment decisions in Keynes

Abstract

The article explores the relationship between the investment decision in Keynes and research in Behavioral Economics. For the identification of common theoretical elements between these two approaches, their contributions were briefly recovered from the history of economic thought. The developed discussion contrasts elements that support the two currents of thought, promoting a reading of their complementary theoretical aspects: (i) rationality and uncertainty; (ii) heuristics and conventions; (iii) individual decision and investment decision. This allows a deeper understanding of these proposals, and a better understanding about: (1) the role of subjectivity in Behavioral Economics from using the concept of heuristics in the analysis of the Keynes» investment decision; and (2) the psychological aspects pointed out by Keynes that explain how elements that influence the investment decision (interest rate, for example), are not determinants in choices. The work supports a complementarity of Prospect Theory and Mental Accounting with the psychological analysis of aspects pointed out by Keynes as fundamental in the investment decision: animal spirit, expected return and interest rate, fundamental uncertainty and the relationship between marginal capital efficiency and interest rate.

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Author Biographies

Lucas Casonato, Universidade Federal do Paraná (UFPR). Faculdade de Educação Superior do Paraná (FESPPR)
Doutorando pelo Programa de Pós-Graduação em Desenvolvimento Econômico da Universidade Federal do Paraná (PPGDE/UFPR). Professor de Economia da Faculdade de Educação Superior do Paraná (FESPPR). E-mail: casonato.economia@gmail.com
Auberth Henrik Venson, Universidade Estadual de Londrina (UEL). Universidade Federal do Paraná (UFPR).
Professor Substituto do Departamento de Economia da Universidade Estadual de Londrina (UEL). Doutorando do Programa de Pós-Graduação em Desenvolvimento Econômico da Universidade Federal do Paraná (PPGDE/UFPR). E-mail: auberth.eco@gmail.com
Adriana Sbicca, Universidade Federal do Paraná (UFPR)
Professora do Departamento de Economia da UFPR. E-mail: adsbicca@ufpr.br

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Published
2021-05-29
How to Cite
Casonato, L., Venson, A. H., & Sbicca, A. (2021). The theoretical association between behavioral economics and investment decisions in Keynes. Brazilian Keynesian Review, 6(2), 163-191. https://doi.org/10.33834/bkr.v6i2.208
Section
Articles