Mania in the money market
Today (7 June), Professor Mark Stein from our School of Management collects the the iLab prize for innovative scholarship for his work using psychoanalytic ideas in relation to organisations, and in particular thanks to a recent paper identifying and describing ‘manic behaviour’ in the financial world in the run-up to the 2008 credit crisis.
The causes of the banking collapse that plunged the UK and many other countries into recession have been well documented but an important question remains: Why did economists, financiers and politicians fail to anticipate it?
Observing - but not heeding - the warning signs from the collapse of the Japanese economy in 1991 and the 1998 crisis in south-east Asia, the financial world in the West went into an over-drive of denial, escalating its risky and dangerous lending and insurance practices in a manic response, according to Professor Stein.
He identifies and describes this manic behaviour in the 20-year run up to the credit crisis in a paper published in the Sage journal Organization.