George A. Akerlof and Robert J. Shiller
Conventional economic models fail because they ignore human psychology. By acknowledging the drives that govern human behavior, we can better understand why markets crash and how prosperity can be restored.
Confidence operates in an endogenous cycle, driving economic expansions through intuitive overconfidence and causing severe depressions when panic replaces trust.
The human desire for fairness dictates wage-setting and prices, explaining why wages do not easily drop during recessions and thus contributing to involuntary unemployment.
Periods of economic euphoria encourage corruption and bad faith, as a trusting public buys into fraudulent or predatory financial products.