Animal Spirits

  • by George A. Akerlof, Robert J. Shiller
  • Narrated by Marc Vietor
  • 8 hrs and 16 mins
  • Unabridged Audiobook

Publisher's Summary

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.


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Customer Reviews

Most Helpful

A Relevant Portrayal of Behavioral Economics

If you've ever read a book on Behavioral Economics and wondered why PHd candidates spend so much time formulating theories on the obvious, this book is for you. This book is applied Behavioral Economics as it relates to the crisis of 2007 and it is a mostly brilliant work at that.

If you are a capitalist, you might want to stop at the end of Chapter 12 as the authors take off their lab coats and get up on their social apologist soap box in an inexplicable departure from an otherwise coherent book.

One nagging point that the authors might not agree with is what I percieved to be an interchangeable use of "Economies" and "Markets". That strikes me as particularly egregious in a book on behavioral econ.

Absolutely don't agree w conclusion that Animal Spirits can or should be regulated away. Still, well worth a read.
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- CWALL "Cwald"

Fatuous Spirits

Firstly, I completely agree with the basic premise of this book; current economic theory does not account for the non-economic urges (animal spirits) that greatly effect financial decisions. Unfortunately that is about as far as my agreement extends. I think most economists agree animal spirts are important BUT they are very difficult to quantify, thus the lack of a coherent theory involving animal spirits. This does not seem to bother the authors, who instead of quantifying their theory, tell stories about animal spirits. These stories sound reasonable, but anyone can make up stories that sound reasonable. Such stories are not evidence at all, let alone compelling evidence. Most of the stories, when analyzed carefully, are very weak at best.

The authors propose to show how “corruption” stimulated several recessions. Not only was the argument quite weak, the editors seem to have added a single line after the rest was written indicating that it was clear there were several other more important causal factors.

The authors propose the fact union labor contracts generally don’t include cost of living adjustments in their contracts, or workers strongly fight wage reductions demonstrate that people don’t understand inflation (the money illusion). I suspect union contract negotiators are quite aware of inflation, as are workers fighting wage reductions, and instead they don’t want COLAs or wage reductions because accepting such deals are not good long term negotiating tactics. Certainly many people don’t always consider inflation properly, but I think the authors significantly over-emphasize this weakness.

The authors propose the root cause of the 2007 financial crisis was the MAC’s loosening credit to high risk minorities. This loosening caused private mortgage providers to loosen their credit. Of course this makes no sense if the mortgage provider was planning to keep the mortgage. My favorite book on the 2007 crisis (The Big Short) gives a very different, more compelling, and a bit more complex explanation. Very briefly, financial analysts found they could package very diverse sets of mortgages and demonstrate these diversified products would have performed well in almost any historical period. They used this data to convince the largest, most sophisticated, insurance company on the planet to insure the product, then they included the insurance with the product. Rating agencies reasonably rated these products highly. The story was mathematics and computers allowed regional risk to be diversified then insured making these products highly profitable, yet low risk. One problem, once the banks found they could sell these mortgages as fast as they could write them, they started writing mortgages with higher and higher risk. This rendered all the statistics completely useless, but the story had been proven, so the process continued, until the mortgages began to fail across all regions, all at once, at very high rates. It quickly became clear these products were incredibly risky.

The combination of over simplification, weak supporting evidence, and a complete lack of specific practical proposed actions makes this book utterly impotent.

The idea that the government should somehow regulate these vague, non-quantitative, animal-spirits is simply frightening.
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- Michael "I focus on fiction, sci-fi, fantasy, science, history, politics and read a lot. I try to review everything I read."

Book Details

  • Release Date: 08-11-2009
  • Publisher: Audible Studios