"In saluting Keynes' quip, Akerlof and Shiller argue that much of the story is in the unreliability and incompleteness of supposedly rational behavior--the micro-foundation of the free-market model. They contend that modern economics, even self-described Keynesian economics, has given short shrift to this core behavioral insight. . . . Their best chapter is on the limited capacity of central banks to prevent or cure calamities."---Robert Kuttner, The American Prospect
"My book of the week is an easy one this time around: it's Animal Spirits, by Robert Shiller and George Akerlof. . . . Admittedly, I'm biased as a fan of both Shiller's and Akerlof's. Believe me, however, when I say the blessedly brief Animal Spirits is a thoughtful and well-written look at how economics discarded psychology and lost its way on the trip from Adam Smith, through Keynesianism, to laissez-faire. The book puts the current crisis in a useful economic context, with consistent and practical selections from behavioral finance illuminating everything along the way. . . . Highly recommended."---Paul Kedrosky, SeekingAlpha
"[T]his book is rather more than the usual lament about the failings of economics. Its authors are two of the discipline's leading lights. . . . Most of the time, the unrealistic assumption of rationality serves economists fairly well. They should, however, be more prepared to depart from it, especially in times like these--even if that makes behaviour more difficult to describe in elegant equations. Messrs Akerlof and Shiller have therefore done their profession a service.", The Economist
"Animal Spirits [is] . . . the new must-read in Obamaworld."---Michael Grunwald, Time
"Winner of the 2009 Finance Book of the Year, CBN (China Business News) Financial Value Ranking"
"What Sigmund Freud did for the study of the mind, George Akerlof and Robert Shiller are doing for economics. Freud, healer or fake--take your pick--built a career and a field of medicine on the idea that people are driven by irrational forces. Akerlof, professor of economics at the University of California, Berkeley and winner of the 2001 Nobel Prize in economics, and Shiller, the Yale economist who is the eminence grise of the housing meltdown, argue that massive government market intervention programs are the only way to turn fear into enthusiasm for spending and investing--the 'animal spirits' that are an essential part of recovery. . . . Akerlof and Shiller pick up on the idea of the emotional impetus to investment. With elegant reasoning and lovely prose, they demonstrate that we'll all be wallowing in misery unless governments around world, especially the in the G7 nations, help to return markets to optimism. . . . Animal Spirits is a fine discussion of the last few decades of development of economic theory, especially monetary economics."---Andrew Allentuck, The Globe & Mail
"White House Budget Director Peter Orszag is a numbers guy, a propeller head as President Obama would say. But as David Von Drehle and I write in this week's print version of Time, Orszag has been spending his time recently reading not about spreadsheets, but about psychology. In particular, he has been reading a new book by the economists George Akerlof and Robert Shiller called Animal Spirits: How Human Psychology Drives The Economy, and Why It Matters For Global Capitalism. . . . We are, it turns out, slaves to the Animal Spirits. They have brought us to our knees. And now they are the only things that can save us."---Michael Scherer, Time.com's Swampland
"Akerlof and Shiller remind us that emotional and intangible factors--such as confidence in institutions, illusions about the nature of money or a sense of being treated unfairly--can affect how people make decisions about borrowing, spending, saving and investing. Animal Spirits is an affectionate tribute to the man [John Maynard Keynes] whose ideas, unfashionable for the past 30 years, have resurged.", Nature
"In an intriguing new book, Animal Spirits, US economists George Akerlof and Robert Shiller argue that psychology plays a far bigger role in determining economic outcomes than economists realize--and that, broadly speaking, people get what they expect. If we think good times are ahead, we act confidently in a way that creates them. And if we expect a downturn ahead, we act defensively and unwittingly ensure that's what we get."---Tim Colebatch, The Age
"As George Akerlof and Robert Shiller show in a new book Animal Spirits, this is no freak storm. It may mark the long-awaited encounter between psychology and economics. . . . Akerlof and Shiller's book is probably the first macroeconomic exploration of the subject that is accessible to those interested in the subject but who don't have the academic training to understand the detailed argument.", Mint
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.
The global financial crisis has made it painfully clear that powerful psychological forces are imperiling the wealth of nations today. From blind faith in ever-rising housing prices to plummeting confidence in capital markets, "animal spirits" are driving financial events worldwide. In this book, acclaimed economists George Akerlof and Robert Shiller challenge the economic wisdom that got us into this mess, and put forward a bold new vision that will transform economics and restore prosperity.
Akerlof and Shiller reassert the necessity of an active government role in economic policymaking by recovering the idea of animal spirits, a term John Maynard Keynes used to describe the gloom and despondence that led to the Great Depression and the changing psychology that accompanied recovery. Like Keynes, Akerlof and Shiller know that managing these animal spirits requires the steady hand of government--simply allowing markets to work won't do it. In rebuilding the case for a more robust, behaviorally informed Keynesianism, they detail the most pervasive effects of animal spirits in contemporary economic life--such as confidence, fear, bad faith, corruption, a concern for fairness, and the stories we tell ourselves about our economic fortunes--and show how Reaganomics, Thatcherism, and the rational expectations revolution failed to account for them.
Animal Spirits offers a road map for reversing the financial misfortunes besetting us today. Read it and learn how leaders can channel animal spirits--the powerful forces of human psychology that are afoot in the world economy today. In a new preface, they describe why our economic troubles may linger for some time--unless we are prepared to take further, decisive action.