In the era of capitalism and gods markets globalized, the confidence it is the essential fuel to make the engine of an economy run faster village. The real difficulty for experts lies in precisely quantifying its weight. Yet, it exists and has a strong impact on the most well-known indicators, such as GDP. And when it fails, the consequences are paid heavily.
Over the years, the Education in this context they have been various and have brought to the light of results which underline the absolute importance of a value like the confidence. Economists Paul Zak and Stephen Knack found, in research published in 1998, that a 15% increase in a nation’s belief in the “reliability of most people” can add a full percentage point to economic growth each year.
In 1996 the sociologist Fukuyama in his research he discovered the existence of a fort correlation positive between capital social And growth economic, highlighting how a country that has accumulated considerable social capital, registers high rates of industrialization and the presence of large companies. Social capital is nothing more than the concrete expression of a high rate of trust among fellow citizens, who interface more with each other and new business projects are born in the exchange of ideas.
As we said, it can affect both ways positive and be in the way negative. A concrete and tangible example of these theories are the Russia and the South Italy, geographic areas that are so different from each other but which have a common factor from a social point of view, that is, very low levels of trust among citizens. This seems to be the first factor that leads them to have limited economic growth. Trust is a real social accelerator of consumption, investment and gross domestic product.
At this stage we may be in one phase recessive for the confidence. At times like this, people tend to think twice before making an investment. The same thing happens in the world of work, slowing down productivity. Another prominent scholar such as the American political scientist Francis Fukuyama, in his 1995 book Trust, stated that “if you can rely on people to do what they say they will do, without costly coercive mechanisms to make them trustworthy, many things become possible.”
There confidence has a role that for the economy, and society in general, goes far beyond other more “technical” aspects and is at the basis of the so-called “Behavioral economics”, where each actor decides how to allocate his resources based largely on the perceived and qualitative elements (expectations about the future for example) compared to quantitative ones, which in some cases could also indicate opposite choices.
Translated into practical terms it means that the degree of confidence the coming months will have a decisive impact on decisions relating to savings, investments, expenses of families, start-up or termination of activities entrepreneurial, desire to challenge the conventions and the status quo by the new generations. All crucial ingredients for a robust recovery, which – coincidentally – were included in the expectation of a better future and all to be written at the base of the recipe for the post-war Italian economic boom.
There finance finally, it is an ideal laboratory to understand how elements of an emotional-behavioral nature affect the results of markets, companies and communities. Think for example of the “momentum” effect, or the inertia enjoyed by a stock that has performed well in the immediately preceding period. This is an upward push (or downward, in the event of a negative performance) on which the stock can still count for a certain period of time after having reached its maximum / minimum “adequate implicit value”, in a manner decorrelated from technical fundamentals. underlying, thanks to the perception and consequent expectation of the future that buyers and sellers have about the same.
Therefore, the confidence it is a crucial factor for our future, both for finance and for the real economy. It is an essential element to stimulate the markets and to understand the results of companies and companies. Preserving it is therefore essential to promote the creation of a fertile context on which to start and then continue without hesitation the post-pandemic recovery at a global level.
The full article was published in the January issue of Wall Street Italia magazine