Animal spirits: how human psychology drives the economy, and why it matters for global capitalism / George A. Akerlof and Robert J. Shiller. John Maynard Keynes coined the term “animal spirits” to refer to emotional mindsets. Akerlof’s and Shiller’s distinguished reputations command attention, and. Summary of “Animal Spirits” — Akerlof and Shiller. Every major economic crisis represents an occasion to review the economic theories that purport to explain it, .

Author: Bralabar Vudozilkree
Country: Czech Republic
Language: English (Spanish)
Genre: Sex
Published (Last): 4 January 2017
Pages: 286
PDF File Size: 11.89 Mb
ePub File Size: 10.82 Mb
ISBN: 481-3-40665-388-9
Downloads: 97848
Price: Free* [*Free Regsitration Required]
Uploader: Dinris

This was an interesting book addressing economic events depressions, stock market and real estate booms and busts, etc. And if you want to understand why they think that way, and how it screwed up our economy this book will help.

It would lose marketability but I wish I would hear an economist talk about linearization- various economics theories of the past are actually linearized approximations of actual behaviour, but behaviour outside of the valid linear range is either undefined and maybe undefinable or bears more research. I just finished my second year in mathematical economics. Animal spirits relate to some of the predictably irrational if irrational they really are ways humans set about engaging with the economy.

This is a recommended read for those interested in behavioral economics.

They repeatedly stress the need for decisive action targeted at restoring credit flows, and that the overall stimulus from the government needs to be much larger than would otherwise be the case due to very low levels of confidence about short and medium term economic prospects. Chapter 14 is a conclusion where the authors state that the cumulative evidence they have presented in the preceding chapters overwhelming shows that the neo classical view of the economy, which allows little or no role for animal spirits, is unreliable.

You may not like their conclusions as it relates to policy, yet the premise of expanding theory to include those factors once deemed as “intangible” or “irrational” cannot be understated. Akerlof and Shiller explain why they took these shortcuts and the terrible consequences of that line of thinking. If you’re looking for a book that will bring redemption to Reagan-era supply side economics, this is not the book for you. Why does the stock market and the real estate market overshoot on the way up … and on the way down?

Economists use too simple a model of how people enter into buying and selling transactions exchanges. Some have noted the lack of ‘solutions’ presented here, apart from government regulation and intervention, but I must ask — is there even a real chance of changing human nature?


Humans are not entirely rational creatures with solely economic motivations If we want to live by Keynes’s “the world is ruled by little else”, it is in macroeconomics that we will do so. If ever there were a time for a sobering analysis of how macroeconomic events actually occur, that time was surely now.

They gave several reasons including: To see what your friends thought of this book, please sign up. Hopefully someday I’ll get to work with George as well; his work sounds like almost exactly what I want to be doing. Return to Book Page.

First published inthese two Nobel Prize winning economists discuss here in great detail the role of human psychology in market economies. Aug 23, Scott Garbus added it. They point out that most economists assume that humans are economically motivated and rational in their economic decisions despite irrefutable evidence to the contrary. Fairness is central to how exchanges really work.

Why is it assumed that the politicians who will save us from our irrationality are any more rational than we are? George Akerlof won the Nobel Prize in economics inand Robert Shiller has long been an astute observer of the madness of crowds. He makes a lot of good points, but here’s the main problems: Do we really need another missive which forcefully argues that people often act in irrational ways that harm their own self-interest?

This means with intelligent government regulation to curb the effects of mass irrationality of booms and busts, and consumer insight into their own irrationality: Insofar as “Animal Spirits” takes the reader on a guided tour through some of the financial cataclysms of the 20th century, it is useful as a historical narrative. The authors assert that the business cycle can be explained by rising confidence in the upswing eventually leading investors to make rash decisions and ultimately encouraging corruption, until eventually panic appears and confidence evaporates, triggering a recession.

But he makes no predictive propositions; there’s nothing quantitative. It is very well-written, engaging and easy to read.

Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism

Such as the repeatedly told story that house prices will always rise, which caused many additional people to invest in housing following the dot com bust of It summarises well the areas where behavioural economic research indicates real deficiencies in current macroeconomic models; what it does not do is propose obvious alternative models that are not themselves subject to obvious problems. Animal Spirits is an well-written treatise accessible to both economists and non-economists alike.


This is also, effectively, a re-introduction to Keynesian economics, a view of economics that went out of favour with Milton Freedman and Ronald Reagan — the consequences of which we are living with today. It does not require much prior economics study but it still has much to teach the economics specialist. Animal Spirits is an important critique of how modern “scientific” and “quantitative” macroeconomics has failed to predict or adequately explain important phenomena in economic history, the last of which being the Great Financial crisis of this millennium.

Humans are emotio Humans are not rational animals.

Animal Spirits (book) – Wikipedia

By the end, however, the reader is left scratching his head, wondering why he is left with a set of recommendations that amount to little more than the warning that people will sometimes behave irrationally, and that this behavior can often have a disproportionate effect upon macroeconomic patterns.

No trivia or quizzes yet.

Basically, what happens to our understanding of the macroeconomy when we stop assuming people are rational—because they’re not? These are applied to multiple questions, such as real estate bubbles, central banking, racial discrimination, why recessions happen Although I read this four years ago, I still remember it very clearly.

Confidence, fairness, corruption, money illusion, and stories. Most people think inflation will make things hard to afford, they do not get that prices of assets and wages raise together aniimal everything else.

The money illusion section was very good, none of the other economics books I’ve read have given it as much as attention as it gets here.

Lists with This Book. Good luck in trying to find a way to do that! The book asserts that a variety of otherwise puzzling questions can be answered once one allows for the effect that emotional drivesor “animal spirits,” have on shillre factors. Given all this, it does make it hard not to think that the system is rigged.