The Role of Human Psychology in Economics

Human psychology plays a significant role in economic decisions, often impacting whether investments are made or purchases are initiated. Economic conditions can fluctuate based on consumer confidence, as feelings of optimism can drive growth, while pessimism can lead to stagnation. This interaction between mood and economic behavior was exemplified by the concept of 'animal spirits,' popularized by economist John Maynard Keynes, which highlights how emotions influence financial activities. Currently, this is evident in China, where a generation of graduates facing bleak job prospects expresses their despair through social media, showcasing the profound mood affecting the economy.