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

3.76  ·  Rating details ·  3,792 ratings  ·  153 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 ...more
Hardcover, 248 pages
Published February 1st 2009 by Princeton University Press (first published 2009)
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Rishi Chopra Yes; the book is a very enjoyable read & doesn't require any special knowledge a priori.
Rishi Chopra Yes; the book is a very enjoyable read & doesn't require any special knowledge a priori.

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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
May 22, 2017 rated it really liked it
Part of the reason why I found this book quite so interesting was because I’ve read lots of books about behavioural economics over the years, but they are much more interested in psychology than they are in economics. For instance, a book that I am constantly recommending and even buying for people is ‘Predictably Irrational’ – and it proudly refers to itself as being one set in behavioural economics, but really, you sort of have to squint to see the connection to economics most of the time. Now ...more
Dec 12, 2009 rated it it was amazing
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
Sagar Jethani
Dec 22, 2010 rated it it was ok
Shelves: finance, history
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
In The General Theory, John Maynard Keynes wrote that the switches between optimism and pessimism which drive rises/falls in investment spending which, in turn, cause rises/falls in output, were driven by '"animal spirits". This was always one of the weaker points of Keynes' analysis, essentially a big shrug of the shoulders, removing any notion of economic actors rational responses to changing circumstances. This book is simply a longer restatement of that argument. People are crazy, so the aut ...more
Apr 29, 2009 rated it it was amazing
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
Tuncer Şengöz
Kitap 2008 krizi öncesinde yazılmaya başlamış ve krizden hemen sonra, parasal tedbirler alınırken yayımlanmış. Bu nedenle son gelişmeleri içermiyor.

Hayvansal Güdülerin ekonomi ve finans dünyasındaki izdüşümleri beş ana başlıkta toplanmış: Güven, adalet, yolsuzluk, para yanılsaması ve hikâyeler. Klasik iktisadın bu başlıkları yok sayarak, bütün varsayımlarını "ekonomik beklentilerle hareket eden rasyonel insanlar" üzerine kurması haklı olarak eleştiriliyor ve iktisadın bazı sorunlarına, hayvansa
Aug 13, 2009 rated it really liked it
Shelves: economics
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
Feb 05, 2011 rated it liked it
Shelves: economics, audio
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
John Gurney
Jan 10, 2015 rated it really liked it
Two Nobel Prize-winning economists, George Akerlof and Robert Schiller, use their version of Keynes's theory of "animal spirits" to explain past financial crises and how economies grow. They have interesting psychological ideas, such as the importance of a national "story", really a paradigm, that drives herd mentality and, thus, irrational behavior. Examples would be the recent, ill-fated real estate mania in the United States or the malaise on the part of business operators in FDR's second ter ...more
Ryan Melena
Oct 06, 2011 rated it it was ok
Shelves: audio-books
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
Melvin Marsh, M.S.
Feb 07, 2018 rated it liked it
Shelves: business, economics
I was expecting a lot more psychology than there was. 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.
Apr 28, 2011 rated it liked it
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
Brian Jones
Nov 25, 2017 rated it liked it
Boy, George thinks a lot of himself.

Basically, he says the behavioral economics is true, and pretty much claims to have thought of it.

He makes a lot of good points, but here's the main problems:
1) He claims to have "explained" economics. But he makes no predictive propositions; there's nothing quantitative. He has a narrative that is consistent with historical examples, but that's a far cry from an economic theory.
2) He goes over the top for the money illusion. He claims that the existence of no
D.L. Morrese
Oct 08, 2017 rated it liked it
Humans are not rational animals. That's basically the central point of this relatively short book on behavioral economics. Published in 2009, it still has some valid things to say. It argues that any theory that presumes an economy moves due to the rational responses of self-interested actors in response to reasonable amounts of valid information is working under a false premise. This observation seems so obvious to me that I wonder how anyone would have ever thought otherwise. Humans are emotio ...more
Jan 25, 2012 rated it really liked it
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.

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
Aug 21, 2018 rated it it was amazing
Animal Spirits is a book about macroeconomics with an interesting twist. Rest assured this is not another mundane behavioral economics handbook. The book was written in response to the financial crisis and the authors are economics rockstars. Robert Shiller and George Akerlof are Nobel laureates and Keynsians who believe that government has an active role to play in macroeconomic management. The investment community will recognize Shiller as the prescient economist who predicted the collapse of ...more
Nishanth Pathy
Nov 13, 2018 rated it really liked it
Animal Spirits is an well-written treatise accessible to both economists and non-economists alike. It summarises well the areas where behavioural economic research indicates real deficiencies in current macroeconomic models; what it does not do is propose obvious alternative models that are not themselves subject to obvious problems.

Akerlof and Shiller (both prominent Nobel-laureate economists) take the strongest aim at mainstream economics's core assumption that individuals act as "expected uti
Sep 19, 2013 rated it really liked it
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
Karl Nordenstorm
May 21, 2017 rated it really liked it
Some of the ideas and info:
* People have no idea how much they should save. 1%, 5%, 10%, 50% of savings. They just look at what others do and do that. Meaning savings rates could change suddenly, as a change in fashion, causing reduced spending and a recession. (Fun fact: By various means Singapore forces everyone to save 40% of income)
* Nor do people understand inflation. Most people think inflation will make things hard to afford, they do not get that prices of assets and wages raise together
Mark Robertson
First published in 2009, these two Nobel Prize winning economists discuss here in great detail the role of human psychology in market economies. They point out that most economists assume that humans are economically motivated and rational in their economic decisions despite irrefutable evidence to the contrary. In order to be effective, policy needs to reflect reality.

This book doesn't contain any prescriptions for regulatory reform and policy responses to the Great Recession. Rather, it expos
Aug 08, 2012 rated it liked it  ·  review of another edition
Shelves: world-affairs
Animal Spirits is an important critique of how modern "scientific" and "quantitative" macroeconomics has failed to predict or adequately explain important phenomena in economic history, the last of which being the Great Financial crisis of this millennium. In this book Akerlof and Shiller convincingly introduce psychology to macroeconomics to bridge this gap. The main draw-back I found is that some chapters, especially the ones on financial markets, are less accessible to a more general audience ...more
Dah. Pérdida de tiempo. Es un libro cortito (muchas notas y bibliografía), terminó en el 70%. La idea del libro es que lo que Keynes llamó "Espíritus Animales" (animal spirits) es lo mismo que hoy día se conoce como "economía conductual" (behavioral economics). Algo tipo: como la gente no actúa como debería, hay que tener un estado grande que regule, y vele porque no se vaya todo al demonio. Muy yankee-centrado. Y se quedó viejo pronto porque usa la crisis del 2008 todo el tiempo como referencia ...more
Nov 25, 2018 rated it liked it
This was an interesting book addressing economic events (depressions, stock market and real estate booms and busts, etc.) without "economics" jargon. The primary theme of the book attacks the basic economics premise that people primarily make rationale decisions in their economic interests, instead of often acting irrationally or in response to perceptions of fairness, corruption, etc. This seems like a common sense approach, but was apparently revolutionary for economists.
Scott Garbus
Economists assume that individuals make choices based on their rational self interest. Psychologists know that individuals frequently make irrational choices that are fueled by emotion. Animal Spirits attempts to illuminate the role of the irrational on markets, and how it may have influenced our recent economic history. The book was reasonably interesting if you like that kind of thing.
David Wen
Nov 25, 2016 rated it really liked it
Great book discussing the benefits and drawbacks of a capitalist economy where the "the invisible hand" is at work. There are many events that occur which fits no model of economic theory and makes the argument that no government intervention is a very poor choice of regulation in where the theory does not apply.
Jake Losh
Sep 12, 2017 rated it it was ok
Recommended to Jake by: Greg Mankiw
It was OK. I think it will age rather well as both a narrative of the financial crisis and as a sort of manifesto of what the "New Keynesian" approach to macroeconomics is all about, but it's not as rigorous as I'd expected. I'm also still not quite sure what's to be done to keep our "animal spirits" in check. It read more like a list of examples of irrational behavior in history, but Kindleberger and other books already treat the topic quite well. I'm not sure what this book adds.
Oct 05, 2017 rated it it was ok
Although I generally share Shillers' and Akerofs' views, this book is highly anecdotical and full of sophisms. Irrational Exuberance was a much better read.
Aug 21, 2017 rated it really liked it
Shelves: money
Very well researched, but not too actionable
Andrej Badilla Solano
El texto se explaya en demasía y redundantemente.
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George A. Akerlof is a Professor of Economics at the University of California, Berkeley, and 2001 Nobel Laureate in Economics.
“The thought experiment of Adam Smith correctly takes into account the fact that people rationally pursue their economic interests. Of course they do. But this thought experiment fails to take into account the extent to which people are also guided by noneconomic motivations. And it fails to take into account the extent to which they are irrational or misguided. It ignores the animal spirits.” 2 likes
“We have shown that a great deal of what makes people happy is living up to what they think they should be doing.” 2 likes
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