Attempting to quantify Keynes’ concept of “animal spirits”

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32 pointscacher4 comments

If we are looking for academic research to understand random asset bubbles similar to recent Gamestop events, Vernon Smith's Bubbles and Crashes experimental paper seems much more enlightening than this overview. https://www.jstor.org/stable/1911361?seq=1

Gamestop isn't something Economic theory really covers. They don't tend to pay much attention to the implementation details of the underlying market apparatus, so the various dynamics that occur around shorting shares, price pressure when the position is closed, naked shorting, etc. aren't something they think a whole lot about.

Keynes was ok for his time on the banking system, and made a fortune on foreign currency trading, but HFT etc. was a bit before his time.

There is an AER paper in naked short selling, and Smith and other experimentalists have done extensive work on mechanism design.

When the top journal publishes on it, and someone wins a Nobel for the area, I’d say there is theory to cover it.

Speaking as one of those experimentalists, I wouldn't describe it as extensive.

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