Friday, March 6, 2009

Shiller on Animal Spirits

Robert Shiller and George Akerlof have a new book recently, named Animal Spirits:How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism, in which they attribute the current economic downturn to the Keynesian notion of so called "animal spirits". They argue 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.

Here is a recent talk from Shiller:

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