A review by inquiry_from_an_anti_library
Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism by Robert J. Shiller, George A. Akerlof

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.