George Akerlof

There are many markets in which buyers use some market statistic as a guide to the average quality of prospective sellers. But in these markets, the sellers who are willing to sell at the market price are those with the lower quality products.

Gresham's law has been stated as 'bad money drives out good.' But this is misleading. It is not bad money that drives out good, but good money that drives out bad.

Asymmetric information can lead to market failure.

In situations of asymmetric information, the market may collapse entirely.

Quality uncertainty is rampant in used car markets.

The presence of lemons drives peaches out of the market.

Efficiency wages explain why firms pay above-market wages.

Workers reciprocate fair wages with higher effort.

Unemployment is not just a matching problem, but a fairness issue.

Fairness in wages influences productivity.

Animal spirits drive economic decisions beyond rationality.

Confidence is key to economic stability.

Stories shape our economic behavior more than numbers.

Macroeconomics without psychology is incomplete.

The economy is not a machine, but a living organism influenced by human emotions.

Identity economics shows how group affiliations affect choices.

People act in ways that affirm their identity.

Norms and identity explain discrimination in labor markets.

Our sense of self influences economic outcomes profoundly.

Economics must incorporate social norms to be realistic.