ISBN-10:
069114592X
ISBN-13:
9780691145921
Pub. Date:
02/21/2010
Publisher:
Princeton University Press
Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism

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

by George A. Akerlof, Robert J. Shiller
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Product Details

ISBN-13: 9780691145921
Publisher: Princeton University Press
Publication date: 02/21/2010
Edition description: With a New preface by the authors
Pages: 264
Sales rank: 509,853
Product dimensions: 5.40(w) x 8.10(h) x 0.90(d)

About the Author

George A. Akerlof is the Daniel E. Koshland Sr. Distinguished Professor of Economics at the University of California, Berkeley. He was awarded the 2001 Nobel Prize in economics. Robert J. Shiller is the best-selling author of Irrational Exuberance and The Subprime Solution (both Princeton). He is the Arthur M. Okun Professor of Economics at Yale University.

Table of Contents

Preface to the Paperback Edition vii

Preface xxi

Acknowledgments xxvii

Introduction 1

Part 1 Animal Spirits

1 Confidence and Its Multipliers 2

2 Fairness 19

3 Corruption and Bad Faith 26

4 Money Illusion 41

5 Stories 51

Part 2 Eight Questions and Their Answers

6 Why Do Economies Fall into Depression? 59

7 Why Do Central Bankers Have Power over the Economy (Insofar as They Do)? 74

Postscript to Chapter seven The Current Financial Crisis: What Is to Be Done? 86

8 Why Are There People Who Cannot Find a Job? 97

9 Why Is There a Trade-off between Inflation and Unemployment in the Long Run? 107

10 Why Is Saving for the Future So Arbitrary? 116

11 Why Are Financial Prices and Corporate Investments So Volatile? 131

12 Why Do Real Estate Markets Go through Cycles? 149

13 Why Is There Special Poverty among Minorities? 157

14 Conclusion 167

Notes 177

References 199

Index 219

What People are Saying About This

Diane Coyle

Animal Spirits makes a very timely and significant contribution to the development of a new dominant paradigm for economics that acknowledges the imperfections of human decision making, a need which the panic in financial markets makes all too apparent. I am not aware of any other book like this one.
Diane Coyle, author of "The Soulful Science: What Economists Really Do and Why It Matters"

Perry

Akerlof and Shiller explore how animal spirits contribute to the performance of the macroeconomy. The range of issues they cover is broad, including the business cycle, inflation and unemployment, the swings in financial markets and real estate, the existence of poverty, and the way monetary policy works. This book is provocative and persuasive.
George L. Perry, Brookings Institution

Snower

This book is dynamite. It is a powerful, cogent, and convincing call for a fundamental reevaluation of basic economic principles. It presents a refreshingly new understanding of important economic phenomena that standard economic theory has been unable to explain convincingly. Animal Spirits should help set in motion an intellectual revolution that will change the way we think about economic depressions, unemployment, poverty, financial crises, real estate swings, and much more.
Dennis J. Snower, president of the Kiel Institute for the World Economy

Solow

This book is a sorely needed corrective. Animal Spirits is an important—maybe even a decisive—contribution at a difficult juncture in macroeconomic theory.
Robert M. Solow, Nobel Prize-winning economist

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Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism 3.8 out of 5 based on 0 ratings. 25 reviews.
The_hibernators More than 1 year ago
I expected Animal Spirits to be a macroeconomics book for the "popular reader." Although I am popular, and a reader, I didn't fully understand it. However, I got some good information out of it anyway-info that I'm sure will build a knowledge base on something I know little about. As I understand it, the premise is that the US/world economy is driven by "animal spirits," a force which leads people not to think rationally about money, but emotionally. Thus, sometimes the general populace will feel happy and safe about the economy and spend a lot, thus boosting the economy. And sometimes they will feel scared and unsafe, so they don't invest or spend, promoting a recession. If you're looking for a book that explains behavioral economics to people who don't understand, this is not the book for you. Since I didn't understand it, I can't say whether it's any good for people who DO understand what the writers are talking about.
The_Hibernator on LibraryThing More than 1 year ago
Animal Spirits is a macroeconomics book for the ¿popular reader.¿ Although I am popular, and a reader, I didn¿t fully understand it. However, I got some good information out of it anyway¿info that I¿m sure will build a knowledge base on something I know little about. As I understand it, the premise is that the US/world economy is driven by ¿animal spirits,¿ a force which leads people not to think rationally about money, but emotionally. Thus, sometimes the general populace will feel happy and safe about the economy and spend a lot, thus boosting the economy. And sometimes they will feel scared and unsafe, so they don¿t invest or spend, promoting a recession. If you¿re looking for a book that explains behavioral economics to people who don¿t understand, this is not the book for you. Since I didn¿t understand it, I can¿t say whether it¿s any good for people who DO understand what the writers are talking about.
vegetarian on LibraryThing More than 1 year ago
Emotional and intangible dynamics--confidence in institutions, illusions about the nature of money, sense of being treated unfairly--affect how persons decide about borrowing, spending, saving, and investing
DavidGoldsteen on LibraryThing More than 1 year ago
I've been working in the financial industry for more than a dozen years, and over that time I've grown less confident that we really understand what drives our economy. The myth of the rational actor is disturbing. Of course, it's possible that in aggregate, the actions of myriad nonrational actors may appear rational, but the fact that it's possible doesn't make it necessary. It seems to me we've constructed a house of cards on a flimsy rationalization.With that in mind, I was excited to read "Animal Spirits" by Akerlof and Shiller. I'd recently read Shiller on the housing bust, and though I think he is too optimistic about using financial markets to correct for price bubbles, I think he has a good perspective. "Animal Spirits" is more a manifesto than a fully thought-out economic model. It points the way to a more mature way of modeling behavior, taking into account feedback loops due to confidence, etc. It's only half a model at this point, though: it provides a reasonable framework for interpreting events in the past, but I'm not sure it's ready to make predictions about the future. This is the true test of a model.The prose is good, and the economics are clear. Akerlof and Shiller are clearly writing for the average reader, who'd rather not see an equation in the middle of a casual read. They have an annoying tendency to refer to themselves individually in parenthesis, but otherwise, a nice prose style.
Nodosaurus on LibraryThing More than 1 year ago
This is a book on behavioral economics. The animal spirits is derived from Latin, and refers more to states of mind. Economics is driven more by perceptions and ideas about economics, sometimes irrational. The Keynesian adherence to simple profit-motivated activities can be misleading and inaccurate. George Akerlof argues in support of behavioral economics over the more popular Keynesian economic theory. He pulls examples over the past 20 years or so to establish his argument over behavioral economic's superiority. He posits that people work from stories about economic behavior. These stories are patters of behavior that they expect others to follow. Through the book he uses these stories to explain unemployment, recessions, other behaviors. The book makes good use of examples and the author does take the time to explain his theory and how it differs from Keynesian economics. Its weakness is in the approach. Some of the "real people" examples seem odd, for instance, the real person who who is young, and fresh out of school is a female professor at Harvard. This doesn't feel like a real person and weakens the value of his example. Many of his examples, especially those from history feel either contrived or cherry-picked. In my opinion, the book would have been much stronger if he had pointed out criticisms or alternate theories and addressed them in comparison. He does provide a lot of notes, some with references, which does give it some feel of a scientific paper. I don't feel there is enough in the book to convince me of the strength of his theory of behavioral economics, but it does offer some real good food for thought.
Anonymous More than 1 year ago
In writing for Tuesday after next week.
lynnelondon More than 1 year ago
Archived it immediately.
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BruiserMD More than 1 year ago
Well written and intelligent discussion that non-economists and economists alike can understand. Written in terms anyone can understand, yet this book should have been required reading before I received my undergraduate degree in economics.
Econo More than 1 year ago
Quick, easy read--making the case that human irrationality and group dynamics drive market valuations, not fundamentals. As the authors make clear, this line of thought has been around a long time. Many examples of animal spirits driving markets are presented. So, the book dismantles the idea that markets are efficient and rational. No predictive model is given as a replacement. A better read with more interesting historical detail is Niall Furguson's Ascent of Money. One achieves the same result along a much more interesting path.
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GFF More than 1 year ago
Akerlof and Schiller give us a fresh look at Keynesian applications which might help us to find solutions to our current economic problems. The greater understanding they bring to the discussion should help us to approach these solutions with less fear.
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hrizk More than 1 year ago
Human nature often collide with logic and reason. Akerlof and Schiller explore this issue in their excellent book and show that animal spirit can result in unexpected economical downturn and financial hardships. As the authors conclude, the effect of the animal spirit could be offset by tighter regulation and little nudge that can have positive impact on human behavior.
jakeCL More than 1 year ago
Very informative book. It provides an excellent overview of the current and historical economic stresses for the individual who is not well versed in economics. As a person who has very little education in economics (only class was in high school,40 yrs ago) I was very pleased with the presentation.
sergevansteenkiste More than 1 year ago
George Akerlof and Robert Shiller convincingly demonstrate that people's ideas and feelings (their animal spirits) play an important role in understanding significant economic events. Economic decisions are not based solely on rational, efficient behavior. Akerlof and Shiller first explore the five different aspects of the animal spirits. The authors call them confidence, fairness, corruption and bad faith, money illusion (failure to add inflationary expectations into wage bargains and price setting), and stories (narratives). After exploring these five aspects, Akerlof and Shiller examine how animal spirits have an important impact on a variety of economic factors such as unemployment rate, inflation rate, savings rates, stock prices, real estate prices, and multigenerational poverty among disadvantaged groups. The feedback loops that animal spirits create, help explain among other things why globalization to this day remains excessive and unstable. To their credit, Akerlof and Shiller usually write in a style that makes complex concepts accessible to a wide audience. Whoever wants to know more about specific topics that both authors address, can look at the chapter notes and comprehensive references that are reproduced at the end of "Animal Spirits."
RolfDobelli More than 1 year ago
Nobel laureate George A. Akerlof and prescient Yale economics professor Robert J. Shiller explain the role of human psychology in markets. They say conventional economic theory assigns too much weight to the role of reason in economic decision making, and too little to the role of irrational emotional and psychological factors. That insight would have been novel a few years back, but numerous other authors have made the same point, though few with such sterling credentials. Having asserted their beliefs and offered evidence about the power of emotions, or "animal spirits," the authors prescribe curative policies though they don't always illuminate their proposals' full real-world impact. Akerlof and Shiller's distinguished reputations command attention, and getAbstract confirms that their book is worthwhile reading. Yet, those who know the authors' bodies of work may wish for even more insight.
PrudentMan More than 1 year ago
The usual collectivist, warmed over Keynesian thinking that has never worked. This is another re-writing of history and a weak attempt to smooth over FDR's turning a weak depression in to a deeper one only to survive because Hitler invaded Poland and all productive economies, but the U.S., were virtually destroyed. Throw in the Ivy League Psychobabble and you get an intellectual dishonest attempt to cast dispersions on the rational economic theory of rewarding productivity and individuality. This is the type of thinking that has sent the U.S into becoming a second rate economic power as, unfortunately, their thinking holds credence in a government that has designed a legal system that destroys incentive. Much to the authors chagrin and disappointment there are absolutes whether they wish to acknowledge them or not. Although I thank the academics, politicians and bureaucrats for having my children pay for my health care at the same time I have to apologize to my children for allowing what has happened to this country and the debt they have inherited. The authors seem to think this debt is only psychological. Does any serious, honest person believe that such a system of rewarding consumptive parasites can produce a productive middle class? The entitlement generation wants to make money, not earn it; have a job, but not work. They confuse Crony Capitalism with Free Enterprise which aids and abets the collectivists. Unfortunately the authors get paid to teach this nonsense. Only on campus would they get a steady pay check. They should give the proceeds from this book to the Veterans of Foreign Wars, VA or American Legion to recompense for the damage they are trying to inflict on a country many have fought and sacrificed for.