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Regular version of the site

Article

Investor Myopia and Persistence Of The Global Crisis: A Post Keynesian View

Montenegrin Journal of Economics. 2015. Vol. 11. No. 1. P. 107-116.

The main idea of the paper is that the persistence of the current global crisis can be explained by phenomenon of investor myopia. When agents exclude from the consideration values of future variables after some “threshold” time point they may refuse from investing in durable productive assets. So, investor myopia – as an extreme form of short-termism – inhibits long-run economic development and can prolong crisis.

The underlying causes of investor myopia have institutional and cultural nature and exert influence on the human behavior with time lags.

On the one hand, investor myopia is a reaction on the higher uncertainty due to ineffective institutions leading to a lack of enforcement or lack of punishment for opportunistic behavior. These aspects are very serious problem in some post-socialist countries like Russia or Ukraine. On the other hand, investor myopia is a reflection of values of economic culture emphasizing the importance of maximizing short-term financial gains and/or current consumption. It means that in the developed countries investor myopia can be a product of both evolution of money manager capitalism (including financialization) and dynamics of mass consumption society. Therefore prolonged crises are, perhaps, the inherent features of the modern capitalistic societies characterized by the dominance of financial markets (where institutional investors rule the roost) and values of consumptive society.

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