Analysis on the Impact of Human Psychological on Economic Irrational Exuberance

Abstract

"Irrational Exuberance" is a concept put forward by Fed Chairman Alan Greenspan on the US stock market bubble in 1996. There are many "Irrational Exuberance" in the world economy's history, which is the embodiment of the bubble economy. However, the existing economic theories cannot entirely explain why "Irrational Exuberance" occurs and why "Irrational Exuberance" leads to an economic crisis. Therefore, it is essential to find a new interpretation method. In the past economic theories, the impact of human psychological activities on the economy was often underestimated. This is why this research contains many of the latest knowledge and discoveries about the impact of human psychology on the economy. So far, the main reason for human mental activity is believed to be related to individual self-cognition and feedback. Besides, feedback to information, lack of experience, environmental impact, etc. affect the changes in human psychological activities. Since it is found that individual psychological changes impact group psychological changes, the hypothesis of psychological activity communication is proposed, including "bounded rationality," systematic cognitive bias, the influence of mass media, confidence multiplier hypothesis, and group unconsciousness.