Thursday, November 12, 2009

Taming the spirits

G. Akerlof's and F. Shiller's (the prior perhaps mainly known to econ students as mr. lemon markets), recently published book carrying the intriguing title "Animal Spirits:How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism" is going to be presented in Berlin by Shiller on November 13th.

Animal spirits is, according to economic canon, what drives humans to make bold choices contradicting what for instance a cost/benefit analysis output would advise. Invigorating as this might sound, the authors also believe it to be a source of excessive greed and gluttony, behaviors that admittably have contributed in throwing the world into its current financial mess.

Ergo, according to the authors, albeit a driving force for economic development, the humanly inherent "animal spirit" needs some degree of control from a central institution, in order for economies to work and prosper properly. In this sense I think it could make sense to think of animal spirits theoretically as a potentially both negative and positive (depending on the magnitude it is allowed to take on) externality , a behavioral market failure making governement interaction necessary.

Whether or not the ambitious promises presented in the Princeton university press abstract ("In this book, acclaimed economists George Akerlof and Robert Shiller challenge the economic wisdom that got us into this mess, and put forward a bold new vision that will transform economics and restore prosperity".), are to be fulfilled remains to be seen, however the fact that the two celebrated economists are opening up for the discussion of economic issues using a broader theoretical lens than the customary by including a behavioral perspective is argualby reason enough for going to the book presentation on the 13th of November at the Deutsche Bank, Unter den Linden.

additional reading found on : http://online.wsj.com/article/SB123302080925418107.html

comments and critique, bring it on :)

2 comments:

  1. Interesting to see how the very foundations of economic theories seem to be shaking (Put differently, economists deconstruct their own field). Another book published earlier this year is by Bronk, The Romantic Economist.

    "Richard Bronk argues that economists can best model and explain these creative and social aspects of markets by using new structuring assumptions and metaphors derived from the poetry and philosophy of the Romantics."

    How cool is that?

    http://www.cambridge.org/us/catalogue/catalogue.asp?isbn=9780521735155

    ReplyDelete
  2. personally i think economics has a lot to learn from veternaryscience, no but seriously the reasons of this deconstruction are pretty obvious no?

    its going to be a tough fight for theese guys to reinstall the legitimacy of economic science, if poerty is the solution so be it :)

    ReplyDelete