GB0-320 In "Animal Spirits: How Human Psychology Drives the Economy and Why It Matters for Global Capitalism", George Akerlof and Robert Shiller build on John Maynard Keynes' theory of "animal spirits" - those underlying emotional, power seeking, self-serving motivations that ultimately drive economic matters. Akerlof and Shiller suggest that in our era of irrational exuberance we need a steady hand, not an invisible hand, to guide markets, lead the international community and shepherd humanity toward economic prosperity.
Akerlof and Shiller point out that in the years since Keynes published, "The General Theory of Employment, Interest and Money" economists, determined to cast the dismal science into a legitimate pure discipline, built the foundation of economic theory on two unsound assumptions (treated as fact): People are motivated by economic interests; and People act rationally. Neither of these assertions are demonstrable, accurate, or feasible. Men and women are emotional beings who, more often than not, act first then, if pressed, rationalize a motive for acting.
GB0-360 "Animal Spirits" lays out in two parts the psychological mistakes and motivations that fuel economic action and, by way of questions and answers, illustrates the application of the psychology, that in times of economic upheaval, is shown to lead the economy astray.
Five psychological factors are the animal spirits manifesting in markets:
1. Confidence - it feels right 2. Fairness - inclination toward cooperation3. Corruption and Bad Faith - self interest prevailing at the expense of cooperation4. Money Illusion - faulty perceptions of value in terms of money5. Story - narratives that become facts and inspire action (or inaction)
Each of these factors influences markets on both macro and micro levels. Our system of capitalism is not so much a rational process as it is the confluence of human desires to consume (or experience) and human capacities to produce. While the bounty of capitalism is truly awe-inspiring its power, being a human endeavor, must be suspect. 'Capitalism does not automatically produce what people really need; it produces what they think they need, and are willing to pay for.'
GB0-363 The ultimate solution to capitalism's frailties, Akerlof and Shiller counsel, is to find a middle way. The market, if given a free hand, revels in the passions. Depression follows mania like night follows day. Not always rational, but wholly human forces influence the economy. Confidence in markets, a sense of fairness in exchange, corrupt unscrupulous motives, money illusion and story contribute to market advances and declines in profound and often far-reaching ways. Addressing these animal spirits requires foresight and discipline. Society must make the role of government to set limits and establish boundaries.
Capitalism, to survive, must operate within certain rules. Recognizing animal spirits ultimately move markets, a proactive, wise government must step in to set conditions whereby animal spirits might be harnessed to serve the greater good.
Keynes would be proud. "Animal Spirits" is a quick read, with an insightful premise, and sound recommendations.
Akerlof and Shiller point out that in the years since Keynes published, "The General Theory of Employment, Interest and Money" economists, determined to cast the dismal science into a legitimate pure discipline, built the foundation of economic theory on two unsound assumptions (treated as fact): People are motivated by economic interests; and People act rationally. Neither of these assertions are demonstrable, accurate, or feasible. Men and women are emotional beings who, more often than not, act first then, if pressed, rationalize a motive for acting.
GB0-360 "Animal Spirits" lays out in two parts the psychological mistakes and motivations that fuel economic action and, by way of questions and answers, illustrates the application of the psychology, that in times of economic upheaval, is shown to lead the economy astray.
Five psychological factors are the animal spirits manifesting in markets:
1. Confidence - it feels right 2. Fairness - inclination toward cooperation3. Corruption and Bad Faith - self interest prevailing at the expense of cooperation4. Money Illusion - faulty perceptions of value in terms of money5. Story - narratives that become facts and inspire action (or inaction)
Each of these factors influences markets on both macro and micro levels. Our system of capitalism is not so much a rational process as it is the confluence of human desires to consume (or experience) and human capacities to produce. While the bounty of capitalism is truly awe-inspiring its power, being a human endeavor, must be suspect. 'Capitalism does not automatically produce what people really need; it produces what they think they need, and are willing to pay for.'
GB0-363 The ultimate solution to capitalism's frailties, Akerlof and Shiller counsel, is to find a middle way. The market, if given a free hand, revels in the passions. Depression follows mania like night follows day. Not always rational, but wholly human forces influence the economy. Confidence in markets, a sense of fairness in exchange, corrupt unscrupulous motives, money illusion and story contribute to market advances and declines in profound and often far-reaching ways. Addressing these animal spirits requires foresight and discipline. Society must make the role of government to set limits and establish boundaries.
Capitalism, to survive, must operate within certain rules. Recognizing animal spirits ultimately move markets, a proactive, wise government must step in to set conditions whereby animal spirits might be harnessed to serve the greater good.
Keynes would be proud. "Animal Spirits" is a quick read, with an insightful premise, and sound recommendations.
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