George A. Akerlof And Robert J. Shiller 's ' Animal Spirits '

2379 WordsNov 7, 201410 Pages
Economists, George A. Akerlof and Robert J. Shiller, collaborated to publish a book that provided an intriguing critique of the economic theory and examined the application of behavioural economics to the current and various economic crises occurring in our world. The book is divided into two parts. The first part elaborates on the five various viewpoints of the animal spirits and how each of them influences economic decisions. The five animal spirits are confidence, fairness, corruption and antisocial behavior, money illusion and stories. The second part discusses the effect that these animal spirits have on economic decisions by answering a number of questions which in turn demonstrate the crucial role that they play. The book ‘Animal…show more content…
The authors propose that the government should get involved in the economy and they explicitly state that in the book, saying ‘Its role is to set the conditions in which our animal spirits can be harnessed creatively to serve the greater good.’ (Akerlof and Shiller, 173) And so Akerlof and Shiller are looking to devise a new system having stronger supervision. The system should also protect the public from getting fooled, by others, by taking into account the influence of animal spirits. On the cover of the book the reader sees the animal spirits riding and driving the ups and downs of the economy and that is the basic message of the book. ‘Animal spirits’ was a term created by Keynes and they were in fact the five intellectual and social psychological core phenomena explained in the book by the authors, Akerloff and Shiller. The first animal spirit discussed in the book is confidence and it is portrayed as the foundation of economic behavior. There are moments where confidence can flourish and go beyond the rational. These times are usually considered as the ‘build-up’ times in which the second animal spirit comes into place, corruption and bad faith. The public is unaware of what is good and bad for them and due to this there are several cases in which they are deliberately misinformed about the items they purchase. This is exactly what happened with the re-packaged subprime mortgages. ‘They openly and prominently
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