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

3.78  ·  Rating details ·  4,538 ratings  ·  195 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 2008)
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Rishi Chopra Yes; the book is a very enjoyable read & doesn't require any special knowledge a priori.…moreYes; the book is a very enjoyable read & doesn't require any special knowledge a priori.(less)
Dwight Walker Yes there is very little mathematical analysis but there are some hard numbers for debt in GFC. That was interesting to gauge extent of damage GFC cre…moreYes there is very little mathematical analysis but there are some hard numbers for debt in GFC. That was interesting to gauge extent of damage GFC created. Maths helps there.(less)

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Start your review of Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism
☘Misericordia☘ ⚡ϟ⚡⛈⚡☁ ❇️❤❣
An excellent read on how economics gets to be irrational.

Confidence and its multipliers
Special poverty of minorities
Inflation-unemployment trade-offing
Depression of economies
Cenral banking and its powers
Money illusion
Corruption and bad faith

Dated at the moment? Yes, a bit.
Still, this was a trailblazer at some time and it's still a worthy read since these trends aren't going away any time soon.
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: history, finance
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
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
Graeme Newell
Mar 17, 2019 rated it it was ok
I ended up abandoning this book after the first few chapters. I agree with much of what Akerlof asserts, but the author's continual tone of "the other side is a bunch of idiots" just got tiring. The worlds of psychology and economics both deal with the volatile world of human judgments and are therefore notoriously inexact sciences. I prefer authors who approach both of these topics with a collegial spirit and the humility to understand there is much work still to be done. ...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
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 beca ...more
Rhys McKendry
Jun 06, 2020 rated it liked it
The book sets out to discuss animal spirits, yet I still feel I’ve barely been given any information! Economics as a discipline needs to move away from ergodicity, but the vagueness of the book leads me to believe that many will think there is no valuable alternative (when there is!). The authors’ explanations have little substance and it heavily undermines their arguments.

The theory of animal spirits, which is underpinned by fundamental uncertainty, has been developed heavily by Post Keynesian
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
Ram Kaushik
Mar 25, 2019 rated it really liked it
Shelves: economics
Considering this is written by two Nobel prize winners in economics, this is a surprisingly accessible work, explaining several foundational ideas in behavioral economics. After the 2008 meltdown, few students of economics would argue that ideas like the rational actor paradigm and the invisible-hand-of-the-market are infallible, so sometimes it sounds like they are preaching to the choir. However, I did learn about how psychological biases can impact the economy through unstable feedback mechan ...more
Marcel Santos
Dec 15, 2020 rated it really liked it
Shelves: 2020
This book sees Macroeconomics through the lens of Behavioral Economics (BE).

For those who start studying BE through the works of its founders and first commentators, it is natural to associate it with Microeconomics. This is due to BE’s focus on human behavior at the level of the individual, which can be (and is) extrapolated to broader group levels to better describe and predict economic behavior and its outcomes. By incorporating scientific observations of human behavior, Microeconomics has ga
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
Feb 05, 2011 rated it liked it
Shelves: audio, economics
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
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
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
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
Feb 02, 2020 rated it really liked it
Classical economics is misleading in the analysis of various problems in the economic crisis because they ignore that human nature is the basic driving force on economic development and many of these forces are related to the animal spirit, therefore those animal spirits that cannot be quantified are the most likely answers to understand and solve economics problems, this book mainly introduce and unlocks why traditional macroeconomics theory cannot reveal the root of the economic crisis, why ou ...more
Steven Siswandhi
Jul 12, 2020 rated it it was amazing
A warning on how misleading the neoliberal understanding is, this so-called animal spirit, such as fairness, corruption, race, etc governs much of market behavior, which can't be reduced to economic calculations. The 5-star is for how Prof. Shiller managed to make a complicated topic sound comprehensible and tie it back to common-sense language. It definitely didn't feel this way when I studied the Philips curve at uni, he made it sound so simple, such is the clarity of the writing and the econ ...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.
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
Arjun Pathy
Nov 13, 2018 rated it really liked it
Shelves: economics
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
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
Daniel B-G
Apr 05, 2019 rated it liked it
Overall, this was good, though imperfect. The opening section on the psychology they equate with Animal Spirits was a little dull, though partly this is because I’ve read books that explain the subject more thoroughly and accessibly, making this reiteration laborious. The second half is much better, though I think it overstates its case. The book also suffers from being written in the teeth of the financial crisis, so its triumphalist claims to understand its exact causes are a little hubristic. ...more
Brew Schmuck
Mar 14, 2019 rated it it was amazing  ·  review of another edition
A great new approach to macroeconomics. Alas animal spirits are hard to quantify, thus the fierce opposition by economists. But the book is definitely a fundamental work in the development of economics as a science as opposed to economics as a doctrine.

Given the coming end of yer another business cycle, I’d be curious to read a vol 2 focusing on lessons learned and case studies of these insights being applied in the past decade.

I guess the biggest takeaway is - you can’t go against human nature
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
Alexander Mansilya-kruz
Sep 06, 2011 rated it did not like it
The cover sort of promised an engaging text about the ways our "animal spirits" twist and override our rational choices. Instead, it's essentially an extended overview of methodological debates within the economics profession. The "road map for reversing the financial misfortunes besetting us" that the publishers promised is simply not there. The style is accessible, but rather boring. All in all, a disappointment. ...more
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. ...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. ...more
Daniel Dimitrov
Mar 10, 2019 rated it really liked it
Very good nontechnical overview of behavioral macroeconomics of two very fine economists. Did I buy all the stories? Sure I did. Did I always agree with the authors that animal spirits and non-rational behavior are driving so much of the real economy? Probably not. As much as I like to go through the behavioral literature, I’m still not convinced that most of the effects they describe are not second order effects in nature. Still, a really nice book.
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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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“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
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