(by Girolamo Panetta, AIDR partner and CONSIS.Arl Area Manager)

Individual irrationality

During the periods of great economic crisis we have witnessed very strong changes that, both in the negative and in the positive, have cast a line of discontinuity with the past. It is not necessary to recall how great phenomena of reduction of human freedom following the birth of the most ferocious dictatorships rather than the great Keynesian revolution in support of the American new deal, but many and many others have in fact marked a change in social equilibrium and the modification of socio-economic assets existing until then; world-renowned historians and economists have outlined its effects on contemporary society. However, it is enough to get to the present day, to the 2000s and find some events that in my opinion have 'upset' the economic equilibrium worldwide, both as a result of the laws underlying capitalism and globalization, but also due to a series of errors of the governments of the most important states. Joseph E. Stiglitz, 2001 Nobel Prize in economics, highlighted the anomalies of a market, the global one, which in the years following those of the great economic depressions, was thought to be immune from instability and perfectly capable of managing any financial risk. In his treatise 'Bankruptcy' [Einaudi] he highlights how the wrong policy of the American government and the unscrupulous behavior of many individuals, banks and financial companies, led to the credit crisis in the USA in 2008, which then has spread worldwide. Stiglitz examines the crisis in the real estate sector in the United States, which combined with the propensity of banks to issue mortgage loans in a reckless manner (the so-called Subprime), has caused what is defined worldwide as an unprecedented economic crisis, precisely because of the planetary implication it entailed and the damage of which is still evident today. What is upsetting in my opinion is the fact that, according to the Nobel Prize, the speculative action of some is based on the exploitation of the irrational actions of individuals; in fact, the operators of the financial market, but it is only one of many cases, have understood that most people do not read or do not understand the clauses written in the forms, for example, of adherence to credit cards, incurring very high expenses and unwanted. "Nonetheless, very few will go looking for a more advantageous card, partly because they feel they are being cheated in the same way, or perhaps worse by some other company." Speaking of the real estate sector, on the other hand, many do not understand the costs and transaction costs and the 'insiders' know that people will tend to trust real estate intermediaries, perhaps discovering scams and unwanted expenses after the purchase and after the mortgage is taken out. Here is this example, which explains these systemic irrationalities that can give rise to macroeconomic fluctuations; “Irrational exuberance leads to speculative bubbles and boom periods while irrational pessimism is the prelude to the crisis.

In a similar context Stiglitz highlights the importance of government and institutions in preventing the exploitation of individual irrationalities and helping people to make better and better decisions, decisions that in a period of severe crisis can be decisive for individual action and collective. To get out of the crisis, economists stressed that government action was important, but above all personal convictions designed to create a state of positive expectation with respect to the actions taken or to be undertaken.

The businessman.

It is clear that the discussion is much broader and should be deepened by disturbing the principles of macro and micro economics; the possibility therefore of explaining economic phenomena on the basis of the principles promulgated by the Keynesian school (increasingly distant, according to some, to explain the economy of today) and by those who felt the need for a unified approach as advocates of a new - Keynesianism closer to the microeconomic interpretation; many believe in a reform of economic science that goes precisely in simplifying this dichotomy. Instead, the Federal Reserve's statement that it hoped that optimistic beliefs were contagious in times of crisis, as prodrome to the possibility of spending and investment, opens up an issue on which I would even like to disturb the thinking of two great sociologists and economists like Max Weber ( Erfurt, April 21, 1864 - Munich, June 14, 1920) and Joseph Shumpeter (Třešť, February 8, 1883 - Taconic, January 8, 1950), especially on the second, whose theories had for some reason been excluded from the dominant doctrine. Traditional economic theory, the neoclassical model, had little to do with the topic of innovation, just as they did not take into account the importance of information and when some economists realized that innovation is the way to contract the crisis they dedicated themselves to the elaboration of Shumpeter's theories. The basic idea of ​​this economist moves the step within the current of the methodological individualism which above all from a purely economic point of view affirms that individuals, interacting pushed by motivations of personal utility, create social institutions without intention. Weber himself, one of the fathers of sociology, places individual action endowed with meaning, social action and social relations at the basis of every social phenomenon.

The concept of innovation is clear in Shumpeter, whose theory was heavily based on the concept of competition for innovation; each market is dominated by a monopolist who can be overthrown at any time by another monopolist, better at exploiting market situations and through innovation. What concept can best explain the dynamics of the competitive market in information technology, in which giants such as Microsoft, Apple, etc. operate. Not to mention the world of telephony and communication in general, the car and much more. This concept, almost banal in its concrete expression, finds valid support in the idea that Shumpeter had of the entrepreneur, of the one who invests money to also qualify his supremacy and who in my opinion is perfectly in keeping with the concept of economy that is being making way more and more in a world governed by knowledge, digitization and the fragmentation of expectations and social roles, the creation of ever new figures in the world of work and where there is always a certain social conflict. The scenario in which we move is certainly a complex system, just like the one this author explains, and is made up of elements that are completely connected to each other; to be able to emerge in this extremely complicated world, according to Shumpeter, the entrepreneur must be visionary because he sees what others do not see, he must be creative and revolutionary because he must create what does not exist, he must be a leader. Its entrepreneurial function is linked to the possibility of creating innovation.

The strength of these words lies in their lack of history and in their relevance; if the classic concept of economic explanation glimpses only in the capacity of the state to create illusions and expectations in this concept it finds death. Here I glimpse the courage of all those people who have to reinvent their lives following the now unscrupulous dynamism of the world of work; courage that is expressed in the most well-known forms: personal investment in technological and environmental start-ups, in the green economy, etc. But even in the revaluation of certain professions that have been left behind for a long time, I am speaking above all of jobs in crafts. All this creates network, knowledge, structure and macrostructure; if then the State returns to be the guarantor of this irrational exuberance, we will return to more prosperous periods.

When the classic speaks modern - Joseph Shumpeter