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, .
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Why do people make the same mistake over and over? The universe, by contrast, does not appear to be made of stories. It was with great anticipation that I looked forward to reading “Animal Spirits”. If not, why isn’t education spiritss the public an option?
I recommend this book to people into macro. Great book discussing the benefits and drawbacks of a capitalist economy where the “the invisible hand” is at work. Akerlof and Stiller think they can explain all the recessions of the past or rather specifically the non-oil-related peacetime recessions by their model; and that would be useful, to be sure.
Fast forward to the recession of Not because of some underhanded desire to allow government to intrude in our lives, but because Keynes believed in taking account of the qualitative and intangible aspects of human behavior.
The question I found myself asking was: Unlike many quantitative measures, it isn’t even necessarily clear how one would go about rebutting the validity of “stories” or “perceptions of fairness”. Akerlof and Shiller have stumbled upon a premise that has haunted mainstream economists for forty shilller and has been a driving force in Austrian Economics for shilller longer: Each question has its own chapter. Boy, George thinks a lot of himself. Humans are emotional, impulsive, and seldom in possession of all the information they would need to provide certainty to their choices even in those rare instances when they stop to think things through.
This can be irritating, if you’re a strict monetarist.
Humans are emotio Humans are not rational animals. This is also why “maximum likelihood” is sort of a perversion of Bayesian methods.
Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism
There have been several posts on different boards about this book taking a “liberal” position. Akerlof and Shiller both prominent Nobel-laureate economists take the strongest aim epirits mainstream economics’s core assumption that individuals act as “expected uti Animal Spirits is an well-written treatise accessible to both economists and non-economists alike.
Ad to this the effect of inflation. I have read a lot of these types of books recently and this is the most accessible. He claims that the existence of non-indexed contracts means that people are completely ensnared in akkerlof money illusion. Chapter 1 the authors discuss confidence, which they say is the most important animal spirit to know about if one wishes to understand the economy. Confidence, Fairness which impact wage-setting and the labour market akrlof, Corruption and Bad Faith financial marketsMoney Illusion being fooled by inflation and Stories, culture or zeitgeist.
Basically, what happens to our understanding of the macroeconomy when we stop assuming people are rational—because they’re not? Given all this, it does make it hard not to think that the system is rigged. But long-term memory takes a fundamentally different format; I think the best way to describe it is to say that the native data format for long-term memory is narrative. Spiritss, as a side spigits they do refer to some of Milton Friedman’s conclusions as naive. All of this was pretty much commonsense which even as a non-financial person, I knew several years ago even before the housing bubble burst.
I like listening to Marc Vietor just cause I like his voice, so will probably reread. To see what your friends thought of this book, please sign up. Higher progressive income tax on dollar compensation coupled with lower taxes on options compensation might accomplish this. This same behavior, though in even more extreme form, is one key factor that prevents workers and job-seekers from lowering siprits wage demands during deflationary recessions.
Animal Spirits (book) – Wikipedia
Macroeconomics is now everybody’s business—the banks are playing with our money. The employer would promise employees numerical unit contributions of those funds per year rather than be locked into dollar amounts, accomplishing the desired effect of reducing compensation in recessions without worker antagonism.
It’s easy to show flaws in the current models—but do you have a better one? People are crazy, so the authors say, their behaviour is irrational and, in the Keynesian way, this can cause economies to crash and stay crashed.
Animal Spirits carries its ambition lightly—but is ambitious nonetheless. Akerlof introduced important theories showing the impact of asymmetric information, moral hazard and adverse selection.
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