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zuomiriam's review against another edition
4.0
A really interesting look at the intersection between psychology and macroeconomics. Especially since behavioral economics tends to operate on the level of individual decisions, I really enjoyed Akerlof and Shiller's discussion of animal spirits in the context of aggregate events like depressions, central banks' influence, and real estate cycles.
paola_mobileread's review against another edition
2.0
First of all, the good bits - this book was originally written in 2008, and the 2010 paperback edition preface states:
However, the problem I have with this book is that it tends to sell a viewpoint of how the economy works without presenting enough of the alternative viewpoints (though, as the authors state, they perceive their -neokeynesian - view as a minority view at present).
In a nutshell, and very coarsely, the main view is: people are boundedly rationaly, this is something that the mainstream economic view does not want to know about, but really they should, as "animal spirits" do matter a lot - and they proceed to show how this point of view sheds light on a number of economic issues, from why people cannot find work to why financial markets are volatile.
In the end, however, I don't think they manage to reach their objective, as I think most readers would come away with a picture whereby (macro)economists belong to either of two tribes, one peddling unfettered markets, while the other calls for more geovernment intervention to "save" individuals from the effects of their cognitive shortcomings (saving more for retirement, not fallig for snake oil and the like). This is compounded by (macro)economists being unable to agree on the basics (e.g. is there or is there not a trade-off between inflation and unemployment? Does a natural rate of unemployment exists), so surely the reader is bound to be more baffled after reading this book than before starting it.
As we write this in October 2009, we are afraid that the optimism, even if still a bit guarded, reflects an Indian summer. We do not know what lies ahead. We go along with those who consider it a good sign, at the time of this writing, that there are “green shoots” of recovery, and that forecasters are talking about growth of GDP sometime in the near future. It would be far worse if people were gloomier.
But the Animal Spirits view of confidence, both overconfidence and underconfidence, makes us wary. It tells us that we do not know what lies ahead. And now should be the time when we are making plans for what happens if there are future shocks: if there are future Lehman Brothers, future massive declines in the stock market, yet more unanticipated bankruptcies. In the United States, for example, we fear that neither the Congress nor the Obama administration is now readying the public for the possible necessity of further stimulus packages, or for further dramatic action by the Federal Reserve to support credit markets if that should become necessary.
However, the problem I have with this book is that it tends to sell a viewpoint of how the economy works without presenting enough of the alternative viewpoints (though, as the authors state, they perceive their -neokeynesian - view as a minority view at present).
In a nutshell, and very coarsely, the main view is: people are boundedly rationaly, this is something that the mainstream economic view does not want to know about, but really they should, as "animal spirits" do matter a lot - and they proceed to show how this point of view sheds light on a number of economic issues, from why people cannot find work to why financial markets are volatile.
In the end, however, I don't think they manage to reach their objective, as I think most readers would come away with a picture whereby (macro)economists belong to either of two tribes, one peddling unfettered markets, while the other calls for more geovernment intervention to "save" individuals from the effects of their cognitive shortcomings (saving more for retirement, not fallig for snake oil and the like). This is compounded by (macro)economists being unable to agree on the basics (e.g. is there or is there not a trade-off between inflation and unemployment? Does a natural rate of unemployment exists), so surely the reader is bound to be more baffled after reading this book than before starting it.
davidsteinsaltz's review against another edition
4.0
Part of trying to educate myself about economics and finance. Engagingly written, full of sharp insights. I suspect -- more than suspect, really -- that their disturbing portrayal of the state of economic thinking today (outside their domain of behavioural economics) is a bit of a straw man.
inquiry_from_an_anti_library's review against another edition
adventurous
emotional
hopeful
informative
reflective
fast-paced
2.0
Is This An Overview?
Animal spirits are thoughts and feelings of animate people. The psychological causes of economic activity. Animal spirits are the noneconomic motives of decision making. Decisions chosen by more than just rational actors wanting mutual economic benefits. Economists tended to dismiss individual variations in the aggregate, but it is the variations produced by animal spirits that cause economic fluctuates. There are consequences to animal spirits, which leads to a role for government, to prevent the consequences from escalating.
The elements of animal spirits include confidence, fairness, corruption, money illusion, and stories. People make decisions based on the confidence they have in an option, rather than considering all possible outcomes of all options. Confidence in economic activity leads people to participate more, while a dip in confidence can prevent participation that escalates into an economic crisis. People care for fairness, and are willing to punish those who they deem are acting selfishly. Purchasing products and services risks corruption, as the claims about what was purchased can be misleading. Consumer protection is needed for purchases whose quality is difficult to verify, while consumers tend to know the effectiveness of frequently repeated purchases. People tend to think that the value of money is static, which is the money illusion, for in practice money purchases different amounts of the same product over time. Stories build the narrative of events, which defines and motivates human behavior.
Caveats?
The authors bring back the psychological aspects of Keynesian economics, with John Maynard Keynes being the originator of the term, animal spirits. While they propagate an underrepresented idea of Keynes, to rectify the misunderstanding, they also propagate misunderstanding about Adam Smith’s ideas. Smith’s work contained many noneconomic motivations for behavior. The authors recognize how Keynes’s views were stripped of their psychological values, but do not recognize that the same was done to Smith.
sam1972's review against another edition
2.0
I was never fully clear on what was meant by 'animal spirits'. In the introduction its briefly described as "the thought patterns that animate people’s ideas and feelings", which is unhelpfully vague. Behavioral economics, of which this is said to be a quintessential example, is a supposed to be science. But the definition is so lacking in substance that their theory borders on the unfalsifiable.
Apart from that the book is *okay* for the most part. It falls off a bit towards the end, especially when they start talking about race in terms of stories. They essentially say that 'black people need special treatment because they feel bad, and we need to show favoritism to prove that we're on their side, regardless of the results of such policies.'
They even reject an entire book because it 'focuses too much on statistics' and 'not enough on stories'. But the reason we try to avoid stories in science is that its not a reliable indicator of frequency, and is often biased by the lens of the storyteller. This might be all right if all you're doing is trying to understand what people believe, but they authors go beyond that and assume that its a reliable indicator of actual life experience. The problem is that more than 50% of people believe their lives are harder than average, which is impossible. Similar errors abound in most of our self-reports, and should be used sparingly in science.
Apart from that the book is *okay* for the most part. It falls off a bit towards the end, especially when they start talking about race in terms of stories. They essentially say that 'black people need special treatment because they feel bad, and we need to show favoritism to prove that we're on their side, regardless of the results of such policies.'
They even reject an entire book because it 'focuses too much on statistics' and 'not enough on stories'. But the reason we try to avoid stories in science is that its not a reliable indicator of frequency, and is often biased by the lens of the storyteller. This might be all right if all you're doing is trying to understand what people believe, but they authors go beyond that and assume that its a reliable indicator of actual life experience. The problem is that more than 50% of people believe their lives are harder than average, which is impossible. Similar errors abound in most of our self-reports, and should be used sparingly in science.