|  | Authors: George A. Akerlof, Robert J. Shiller
Publisher: Princeton University Press
List Price: $24.95
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Rating:  55 reviews
Sales Rank: 1696
Languages: English (Original Language), English (Unknown), English (Published)
Media: Hardcover
Pages: 264
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Dimensions (in): 9.3 x 6 x 0.9
ISBN: 0691142335
Dewey Decimal Number: 330.122019
EAN: 9780691142333
ASIN: 0691142335
Publication Date: February 18, 2009
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Showing reviews 6-10 of 55
 A case of 'anchoring bias' September 25, 2009
Jan Polowczyk (Poznan, Poland)
9 out of 10 found this review helpful
Economists are discussing the reasons for the last financial crisis, but they agree generally that economics as a science should be a case for revision. The audience is waiting for a decisive book by a new Adam Smith.
The candidate could be in the shape of the new book by George Akerlof and Robert Shiller. Akerlof himself was awarded the 2001 Nobel Prize and he is the main force behind the development of behavioral macroeconomics. Shiller is the main candidate for the next Nobel Prize as a man who foretold the present financial crisis a few years back. These two great names promised a great book. But I fear we are still waiting.
The expression "animal spirits" (spiritus animalis) refers to a basic mental energy and life force. In modern economics it refers to a restless and inconsistent element in the economy. John M. Keynes emphasized the importance of animal spirits in real economic activity, although it did not figure as a determining factor in his economic theory.
Akerlof and Shiller argue and repeat several times that Adam Smith ignored the animal spirits. In fact, Smith is not only the author of "The Wealth of Nations", where he argued that economic behavior was motivated by self-love, but as a professor of moral philosophy he was also the author of "The Theory of Moral Sentiments". According Smith, men, like all other animals are a part of nature. Smith's works were based on a very clear recognition of human psychology. His speculative merchants, butchers, brewers and bakers were real people with all their weaknesses and greed, as well as altruism. Adam Smith is the father of economics as a science. But economic man (homo economicus), as a rational creature motivated purely by economic interests is certainty not his child.
In fact Smith's actors are driven by an internal struggle between their impulsive, fickle and indispensable passions, and their conscience. They are multidimensional human beings. It is therefore high time to recognize him as a forerunner of behavioral economics.
Smith only used the phrase 'invisible hand' three times in all his works, including once in "The Theory of Moral Sentiments" (over 500 pages) and once in "The Wealth of Nations" (over 1000 pages). G.Ackerlof and R.Shiller have used 'invisible hand' four times in their 200 page book.
The Akerlof-Shiller case is only the tip of the 'invisible hand iceberg' developed over many decades by numerous authors. This kind of phenomenon is recognized and described very well by behavioral economics and is called `anchoring bias'.
Jan Polowczyk, Poznan, Poland
 Good illustrative examples that debunk the 'efficient' market theories September 14, 2009
BostonSox
2 out of 3 found this review helpful
Schiller has tremendous credibility since he called the bubble back 4 years ago. The book is a good read on why efficient economic theory fails each time because it doesn't take into account irrational behavior that have behavioral roots. I am not an economist and I enjoyed reading the book.
Could be written better by a high school grad. September 13, 2009
D. Glickman (Boston,MA)
6 out of 6 found this review helpful
I was deeply disappointed by this book. I was truly surprised by the lack of any academic standards and lack of thoughtfulness. There are many ideas here but none are well thought out and they are not put together in a cohesive theory, nor is there any attempt to prove them using well available data. For instance: the authors seem to be stomped by peoples refusal to have their wages lowered during deflationary times and they suggest that this is due to the money illusion. However, is it not obvious that deflationary wages increase ones debt burden? They also seem to suggest that corruption is one of the causes of depression. Why not test this idea by looking at historical data on corruption (There is plenty available) and plot that against GDP growth? I was also surprised that leverage and debt were not once mentioned in the book, even though the book attempts to explain the origins of depression (Then meander off to other topics).
I do not recommend this book.
 The New Era In Macroeconomics September 8, 2009
William Dahl (Redmond, OR)
0 out of 4 found this review helpful
In their new book, George Akerlof and Robert Shiller suggest that:
"The confidence of a nation, or of any large group, tends to revolve around stories. Of particular relevance are new era stories, those that purport to describe historic changes that will propel the economy into a brand new era." (p.55).
Akerlof and Shiller go on to state: "Confidence is not just the emotional state of an individual. It is a view of other people's confidence, and of other people's perceptions of other people's confidence." (emphasis is mine p.55) .
Stories, changes, a new era, emotional states, perceptions -- confidence -- all terms that John Maynard Keynes might point to as sources of explanatory power for economic fluctuations and the instabilities that inhabit capitalism. Keynes, Akerlof and Shiller refer to these influences as animal spirits.
Accordingly, the thesis of this work is captured in the following:
"To understand how economies work and how we can manage them and prosper, we must pay attention to the thought patterns that animate people's ideas and feelings -- We will never really understand important economic events unless we confront the fact that their causes are largely mental in nature." (p.1)
"The human mind is built to think in terms of narratives, of sequences of events with an integral logic and dynamic that appear as a unified whole. In turn, much of human motivation comes from living through a story of our lives, a story we tell to ourselves and that creates a framework for motivation. Life could be "just one damn thing after another" if it weren't for these stories. The same is true for confidence in a nation, a company, or an institution. Great leaders are first and foremost creators of stories." (p.51).
This is a groundbreaking work in macroeconomics. Macroeconomics, as it has evolved over the last several decades, might lead one to succumb to the sheer beauty and mystery of the mathematical portrayals and the inter-related interpretations thereof. This book reveals a new frontier that will hopefully spawn solid research and new explanatory tools - inter-disciplinary in nature (psychology, sociology and perhaps neurological) that may form the new theories of macroeconomics and lead us to courageously consider what we think we know about economic behavior, economies, and the motivations of economic beings -- from a variety of perspectives.
The dawn of new era stories in macroeconomics is upon us. Read what Akerlof and Shiller have to say. Enjoy! I certainly did.
Interesting but Unoriginal September 5, 2009
Rufus Burgess (Upstate, NY)
4 out of 5 found this review helpful
I'll start with the good:
'Animal Spirits' is a concise book on economic theory that is simple enough for laymen to understand and complex enough for the more serious. Akerlof and Shiller are both highly respected economists and it shows in each chapter.
Now the bad:
I was completely disappointed in this book. I had the perception that this book would bridge the economics of Keynes and Minsky with academic advances in behavioral psychology. In Keynes GT he acknowledges that getting into too much psychology would compromise credibility. Psychology has come a great distance since the 1930's. Unfortunately, the largely anecdotal psychology that the authors present doesn't add much to Keynes. Well, at least anything original.
The authors state at the end that we are going through a paradigm shift in economic thought and policy. Maybe I'm being overly optimistic but I still believe that these men can revolutionize economic theory. But this book is in no way revolutionary.
So instead of being the new paradigm in economic theory 'Animal Spirits' is just a retelling of Hyman Minsky's Financial Instability Hypothesis. Instead of the rigorous elements of Minsky's theory the authors give stories of how the economy works.
If anyone wants the economic theory behind 'Animal Spirits' read Hyman Minsky's 'Stabilizing an Unstable Economy'. His book is far more comprehensive and doesn't fall into the pit traps of anecdotal evidence.
Showing reviews 6-10 of 55
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