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Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism

3.68 of 5 stars 3.68  ·  rating details  ·  1,902 ratings  ·  106 reviews

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

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Paperback, 272 pages
Published February 21st 2010 by Princeton University Press (first published 2009)
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Hadrian
Although I read this four years ago, I still remember it very clearly.

A summary of the Keynesian 'animal spirits', or non-rational economic actions which people do, sometimes contributing to later economic crises. These include, but are not limited to, Confidence, the myth of fairness, the illusion of money, corruption, and 'Stories' as past explanations of behavior.

These are applied to multiple questions, such as real estate bubbles, central banking, racial discrimination, why recessions happen
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Gordon
The phrase “animal spirits” comes from John Maynard Keynes, the great British economist, who saw the role of emotion and irrationality as looming large in economic behavior. As Akerlof and Shiller see it, Keynes had it right, but the neo-Keynesians who followed him watered his theories down to conform more closely with the “invisible hand” classical economics of Adam Smith. So what we were left with was a model of rational economic decision-making, where every consumer and businessperson careful ...more
Ed
As someone who trained as an economist and who has been digesting the implications of behavioural economics for economic theory, this book takes the story further: into macro-economics or how the whole economy works. Like the original work of Keynes (not the subsequent simplification), these authors (it is actually by Akerlof who won the Nobel prize for economics AND Shiller who wrote Irrational Exuberance)transform how we should see markets operating effectively. This means with intelligent gov ...more
Sagar Jethani
It was with great anticipation that I looked forward to reading "Animal Spirits". If ever there were a time for a sobering analysis of how macroeconomic events actually occur, that time was surely now. Instead, what I found was a volume which took great pains to destroy a carefully-crafted straw-man: that species of academic economist who, in defiance of common-sense, insists that people behave according to the universal dictates of rational self-interest in every situation, no matter what the e ...more
Joel
This book is a qualitative/non-technical discussion about what is currently being debated in Macroeconomic theory. There have been several posts on different boards about this book taking a "liberal" position. If you're interested in Economics as a science, ignore them. If you're looking for a book that will bring redemption to Reagan-era supply side economics, this is not the book for you.

Akerlof and Shiller are notorious advocates of Keynesian thought. Not because of some underhanded desire to
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Ryan Melena
I found this book to be a significant disappointment. The only point of interest, for me, was the in-depth discussion of "money illusion" and its affects on our economy. Outside of that, the booked felt jumbled. Despite my natural proclivity to the authors' point of view I felt their arguments were poorly made. Additionally, the book seemed to stray into apologia and misinformation regarding the events that led to the current recession. It perpetuated the "Fannie & Freddie caused the crisis ...more
Lucas
The money illusion section was very good, none of the other economics books I've read have given it as much as attention as it gets here.

I also really liked the chapter on the asymmetrical behaviour of compensation in economic down-turns vs. up-turns, again because the subject wasn't given significant text in other books. The book doesn't explore the solution space much- my first thought is that an progressive proportion of wages should be in the flexible form of stock options in the employers
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Tim
If you want to know why the economy works the way it does - this is the book for you. You are not the "rational man" that economists think you are, none of us are. And if you want to understand why they think that way, and how it screwed up our economy this book will help.

Details:
Akerlof and Shiller are great economic thinkers who systematically approach economics from the ground up, and focus on how our "animal spirits" affect the economy. It is very well-written, engaging and easy to read.

I pa
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Samiur
I read this back in 2010, and recently read an article by Shiller on Japan, Abenomics, and how Shinzō Abe has done an excellent job in writing Japan's narrative since the lost decade by boosting morale and confidence among the Japanese geared towards improved productivity and economic growth. Shiller's emphasis on the importance of storytelling as part of political leadership reminded me of when I had read Animal Spirits 4 years ago -- Net-net, I could relate to Animal Spirits as it was more "pe ...more
Philip
George Akerlof and Robert Shiller are widely respected economists.
This book is about the failure of the standard model of economics to either predict or to cope with the recent housing crisis.

The term “animal spirits” was used by John Maynard Keynes in his 1936 book "The General Theory of Employment, Interest and Money" to describe the instincts and emotions that influence economic behavior.
Keynes said, “There is instability due to … human nature … a large proportion of our positive activities d
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Fiona
Not bad for an economics book. Yes, I said economics. And, no I didn't buy this book; I rented it. My first rental Kindle book.

This is not your typical economic book talking about theories. Economic theories are based on efficient markets and rational people which we all know does not exist in the real world. The authors believe that animal spirits, or human psychology, are really motivates people. These animal spirits include confidence, fairness, corruption, money illusion, and story telling.
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Tarek Cherif
I have read this book while taking Professor Schiller's Behavioral Economics course at Yale, making me appreciate it far beyond the barriers of its pages and truly allowing me to dedicate some time and thought to it.

As a psychologist by education, I was pleasantly surprised by finally having a prominent figure in the economic community completely embracing the notion that the human psyche is far more complex than traditional economists view it to be.

This book is not written for those who have ma
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John
I stopped reading this book because it was so poorly written. See somewhat snarky review at RAHF.
Chris Paul
I am a fan of Schiller's ability to ascertain a situation or economic system. That is why I chose the book. I am not very impressed with what he and his partner then represent as solutions. Government is the answer to all problems and situations per the authors. I believe Akerlof is married to Janet Yellen, current fed president. They are definitely of the same mindset.

As can be typical of many books, this could have been a 40 page pamphlet and still gotten the same point across.

As a point of i
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Mike  Kelley

Bit of a 101 text though it has been a few years. A nice refresher with some important points regarding the economic monarchy we live under. While they are both academics in the economic firmament they remind the reader that theory has spent its time prescribing from its own arguments rather than trying to explain. Most economists hide in mathematics for their science quotient but the authors justly remind the astute reader there are other unexplored elements behind all the numbers. You know, pe
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Denisa
Going back to an econ book I read as a grad student was surprisingly challenging and boring as well. The book makes a brave effort to explain through behavioral economics the reasons people and markets act the way they do by bringing in concept of animal spirits. While I agree with the authors' approach and explanations, I often found myself wanting more "meat", more information about the case studies that they very briefly outline. The case studies were painted in very broad strokes and perhaps ...more
Pang
I wanted to give this book a four-star, but I just couldn't. I felt that the book didn't offer anything new to me, even though I shared the same point-of-view as the authors on the topic. It read a lot like graduate level econ textbook, using current economic scenarios as case study.

The book advocated for governmental regulations in the financial industry. The author used the current economic events as well as others to make their points. They argued that regulations would help keep the system m
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Dan
This was a nice overview of what I'd call New Old Keynesian economics (as opposed to old New Keynesian economics). Schiller and Akerlof are essentially arguing that non-quantifiable "animal spirits" are extremely important in determining the status of an economy, and that much economics since Keynes has neglected his key insight on animal spirits. I found myself nodding in agreement at a lot of the arguments in this book, particularly those about the failure of economists to account for human ps ...more
Josh Meares
Animal Spirits is a cheesy name for a good book. "Animal spirits" is a Keynesian term used to describe the effects of human psychology on the market.

Akerlof correctly shows how current economic thinking, in particular the Chicago school, over-simplified mass behavior by assuming that all individuals behave as if they were rational economic actors. The truth is that humans are rational actors, but their motivations are not all economic. Akerlof examines five important psychological elements that
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Paola
First of all, the good bits - this book was originally written in 2008, and the 2010 paperback edition preface states:
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
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Patrick
The dawn of cognitive macroeconomics

JDN 2456563 PDT 15:10.

A review of Animal Spirits by George A. Akerlof and Robert J. Shiller.

When I first came to CSULB about a month and a half ago, we had an orientation for graduate students. One of the faculty members there (Seiji Steimetz, for whom I am now a graduate assistant, and whom I have come to adore) asked us all a question: "What kind of research do you want to be involved in?" Most of the students didn't have an answer. I had an answer I didn't
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Mark

This is an important book, because it explains how some very human psychological tendencies tend to drive the economy -- and in particular to create booms and busts -- that aren't explained easily by rational macroeconomics.

There are some parts that are slow going, particularly (for me) a chapter on "money illusion," which as I understand it is basically people's inability to grasp that money changes in value with inflation and deflation. It might seem that people have an intuitive grasp of thi
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Dan
Written by two economists from Berkeley and Yale, this book should be worth reading. The basic premise of the book is that Milton Friedman led the economic community astray by his claims that the market moves in an efficient manner in which each actor does what is best for herself economically. The authors point out that Friedman departed from Keynes, who felt that other, non-economic factors also influence the economy. Akerlof and Shiller believe that factors other than purely economic motives, ...more
jose coimbra
'Ao mostrar ocmo a economia de fato atua, os autores oferecem algo que a atual teoria econômica não proporciona: apresentam uma teoria que explica de maneira completa e natural como a economia dos EUA e, na verdade, a economia mundial mergulhou na crise em curso. E o que talvez desperte ainda mais interesse: essa teoria estabelece condições para que se compreenda o que precisa ser feita para escaparmos do atoleiro'

'Em sua acepção original, na forma latina antiga e medieval, spiritus animalis, a
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Cristina Ana
Brilliant, less conventional macroeconomic analyses (showing that the more conventional theories fail because they do not include behavioral sciences - animal spirits - to explain patterns in unemployment, institutional policy, credit markets and, in general, in economic crises, from the Great Depression to the last major financial crises of 2008). The claim of the book is that the major macroeconomic theorists have fabricated complex models of rational expectations and efficient markets while f ...more
Will
"'The fundamentals of the economy remain strong.' That cliche is repeated by authorities as they try to restore public confidence after every major stock market decline. They have the opportunity to say this because just about every major stock market decline appears inexplicable if one looks only at the factors that logically ought to influence stock markets. It is practically always the stock market that has changed; indeed the fundamentals haven't.

How do we know that these changes could not
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getAbstract
Rethinking economics’ fundamental principles

Nobel laureate George A. Akerlof and prescient Yale economics professor Robert J. Shiller explain the role of human psychology in markets. They say conventional economic theory assigns too much weight to the role of reason in economic decision making, and too little to the role of irrational emotional and psychological factors. That insight would have been novel a few years back, but numerous other authors have made the same point, though few with suc
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kathleen
I listened to this as an audiobook -- for me, it was the best way to get through a lot of material that at times sounded like an economics textbook. That part was the only reason I didn't give this book five stars. I really resonated with the authors' contention that economic events are driven by psychological factors, the "animal spirits," such as money illusion (ie, when we think about dollar amounts over time, we don't take inflation into account), the stories we tell each other about who we ...more
Nilesh
I found the book quite underwhelming. The point that human beings are not totally rational is quickly made. Even collectively, they are not rational is also well-argued but the rest of the book more or less meanders. Supposed answers to basic questions relies on "irrationality" as the rationale! Whatever that can not be explained with simple logic is attributed to behavioral pitfalls that do not need much rational explanation - with such a logic, answers to almost all questions in any human life ...more
Jenn
An interesting -- if overly brief -- take on how psychology/behavior should be considered by policymakers and economists when coming up with forecasts and prescriptions for what to do with our national economy.

The book is short for a reason, I think -- its main point is quite concise. When John Maynard Keynes originally unveiled his theory of economics, he included as a major part of it the idea that the markets are ruled in part by "animal spirits," -- irrational, or at least nearly unquantifia
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George A. Akerlof is a Professor of Economics at the University of California, Berkeley, and 2001 Nobel Laureate in Economics.
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