Animal spirits : how human psychology drives the economy, and why it matters for global capitalism

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Acclaimed economists George Akerlof and Robert Shiller argue for the essential role of government in restoring economic confidence in the wake of the global financial crisis. They highlight how psychological forces, termed "animal spirits," have jeopardized national wealth, from blind faith in rising housing prices to declining trust in capital markets. Challenging traditional economic wisdom, Akerlof and Shiller propose a transformative vision that emphasizes the necessity of an active government role in economic policymaking. They revive the concept of animal spirits, originally introduced by John Maynard Keynes, to explain the psychological factors that contributed to the Great Depression and subsequent recovery. Akerlof and Shiller contend that managing these forces requires government intervention, as laissez-faire approaches are insufficient. They explore the pervasive impacts of animal spirits—such as confidence, fear, bad faith, and fairness—on contemporary economic life, critiquing Reaganomics, Thatcherism, and the rational expectations revolution for overlooking these dynamics. This work provides a roadmap for addressing current financial challenges, illustrating how leaders can effectively channel the powerful psychological forces influencing today's global economy.