But if Neo-liberal globalization is thought of as recolonization, then the main lines of contention are for national and popular independence struggles. And it is a question of reclaiming sovereignty over particular commons. Sorry, preview is currently unavailable. You can download the paper by clicking the button above.
Policymakers must consider animal spirits in economic management
Read it and learn how leaders can channel animal spirits – the powerful forces of human psychology that are afoot in the world economy today. John Maynard Keynes introduced the concept of “animal spirits” to describe the non-rational factors that influence economic decision-making. These include confidence, fairness, corruption, money illusion, and stories. Yet, while analyzing such a manifesto, there is a need to clearly define and distinguish between the foundations – what makes an action non-economic, and what is irrational? Could one consider the opposition of economic and non-economic in similar fashion to that of the political and the apolitical?
Financial markets exhibit irrational volatility driven by human factors
The second part further engages with the ways in which these animal spirits answer eight crucial questions about markets and global capitalism. Two fascinating cases one can see within book are the chapters on money illusion and on stories. There is an argument made which says that workers truly bargain for nominal wages and not real wages, since what they care about truly is the relative value of their money with the prices of products and services at the time. Hence, workers are not willing to accept a pay cut even if prices would decrease allowing them to still live the same lifestyle. Both, the ones who provide wages and the ones who receive them, prioritize merely what their money can buy, contributing to a money illusion.
Book review – “Animal Spirits”, by George A. Akerlof and Robert J.Shiller
Workers strongly resist nominal wage cuts, even when economic conditions might warrant them, due to perceptions of unfairness. This leads to wage rigidity that can prolong unemployment during downturns. “The factors involved in setting wages and salaries in the real world seemed to be very different from those specified in the neoclassical theory. The one factor that seemed to be of overwhelming importance in all these situations was fairness.” Collectively, the readings compel us to foreground the centrality of difference, power, and non-normativity underwriting the histories, cultures, socialities, and politics of “America.”
Read it and learn how leaders can channel animal spirits—the powerful forces of human psychology that are afoot in the world economy today. Animal Spirits explores how psychological factors influence economic decisions, challenging traditional assumptions of rational behavior. The authors argue that “animal spirits” like confidence, fairness, and stories drive markets and economies. While praised for its accessible writing and novel approach to macroeconomics, some readers found it lacking in practical solutions. Critics noted its focus on the 2008 financial crisis may date the content. Overall, reviewers appreciated the book’s attempt to incorporate behavioral economics into macroeconomic theory, though opinions varied on its success in providing a comprehensive alternative model.
- This sets the stage for later busts when corrupt practices are exposed.
- Ad hoc modifications, such as those the authors suggest, may get better results.
- The twenty-first century is witnessing a resurgence in national love.
- Chapter 12 discusses why real estate markets go through cycles, with periods of often rapid price increase interspaced by falls.
What role does fairness play in wage-setting according to Animal Spirits?
With regards to stories, there is a review of literature and the attention given to narrative by humans. The flaw of considering economics as such a narrative, and the importance people give to stories such as those in the media, and the words of politicians and experts are an important driving force for changes in the market. This too is considered as a framework for understanding decision-making, with the use of animal spirits.
“It is necessary to incorporate animal spirits into macroeconomic theory in order to know how the economy really works.” Chapter 13 suggests that animal spirits can be used to explain the persistence of poverty among ethnic minorities, describing how working class minorities have different stories about how the world works and their place in it, compared to working class white people. The authors argue that the effects of animal spirits make a strong case for affirmative action. Chapter 6 is about why recessions happen.
The authors assert that the business cycle can be explained by rising confidence in the upswing eventually leading investors to make rash decisions and ultimately encouraging corruption, until eventually panic appears and confidence evaporates, triggering a recession. There is a discussion about feedback loops between animal spirits and real returns available, which help explain the intensity of both the up and down swing of the cycle. Akerlof and Shiller began writing the book in 2003. While finishing the work after the 2008 financial crisis, the authors set themselves the additional aim of promoting a much more aggressive US government intervention to alleviate the crises than has been seen as of February 2009. They repeatedly stress the need for decisive action targeted at restoring credit flows, and that the overall stimulus from the government needs to be much larger than would otherwise be the case due to very low levels of confidence about short and medium term economic prospects. A different problem arises in moving from explanation to prescription.
Animal spirits drive economic behavior beyond rational calculations
The twenty-first century is witnessing a resurgence in national love. Political movements are mobilized by national allegiances, and political dissent is marginalized for its lack of patriotic fervor. Public figures and intellectuals outdo one another in proclamations of national fealty, and public policies are organized around mandates for patriotism.
- The couching of local power within discourses of patriotism demonstrates that such politics continue to rely on larger scales for legitimization.
- This book attempts to bring to economics what Franz Kafka, Robert Musil and Hermann Broch brought to literature – the reign of uncertainty and the overthrow of structures of values (Kundera, 2003).
- “The factors involved in setting wages and salaries in the real world seemed to be very different from those specified in the neoclassical theory. The one factor that seemed to be of overwhelming importance in all these situations was fairness.”
- As a consequence, wage contracts are not indexed for economic variability, or, if so, only in one direction, i.e., growth.
- The flaw of considering economics as such a narrative, and the importance people give to stories such as those in the media, and the words of politicians and experts are an important driving force for changes in the market.
A little awkwardly, the authors have tacked an excellent postscript, about what needs to be done, on a chapter about monetary policy. The connections between their thinking on the limits to conventional economics and the issues thrown up by the breakdown are plain, even if they were unable to make every link explicit. Even more than Akerlof and Shiller could have hoped, therefore, it is a fine book at exactly the right time. In their new book, two of the most creative and respected economic thinkers currently animal spirits at work, George Akerlof and Robert Shiller, argue that the key is to recover Keynes’s insight about “animal spirits” – the attitudes and ideas that guide economic action.
Money illusion affects economic decision-making and policy
Confidence could be considered in tandem with this, where confidence depends not merely on individual dispositions, but on how said individuals view and measure the confidence levels of others around them (Dequech, 1999). Such confidence levels depend on how people view the world and how the public understands and is informed by news media, popular discussion, and other ‘stories’. Like Keynes, Akerlof and Shiller know that managing these animal spirits requires the steady hand of government – simply allowing markets to work won’t do it.
Akerlof and Shiller (2009) in their book titled Animal Spirits, revisit the Keynesian concept and widen its scale of application and interpretation. Plato in his Republic defines the virtue of an object as that which allows it to best fulfil its purpose – sharpness for a knife, the brightness of a light, and wisdom, courage, temperance and justice for a human being (Reeve, 2004). In this fashion, Shiller and Akerlof trace out the virtues of ‘non-economic motives and irrational behaviors’. Much as political psychology seeks to understand decision-making on the basis of beliefs, values and attitudes that people possess, economics has always sought to find rationale in the randomness of economic decisions. Animal Spirits deals with this in two parts.The first part characterizes five aspects of animal spirits, namely confidence, fairness, corruption and anti-social behavior, money illusion, and stories, and places them in conversation with economic decisions.