It is argued that changing market sentiment and the breakdown of trust were important factors in the crisis which require treatment by economic theory in order for economists to guide policy. The way in which these issues are understood and analysed by different approaches is considered, including the different implications for policy. It is argued further that a deductive mathematical approach to analysis of market sentiment and trust is unduly limiting, and that a more pluralist approach would more fully address the issues.
What Kind of Theory to Guide Reform and Restructuring of the Financial and Non-Financial Sectors?
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