Animal Spirits

June 2, 2009

I just came across this NY Review of Books article by Benjamin Friedman commenting on Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism, by George A. Akerlof and Robert J. Shiller (Princeton University Press, 230 pp., $24.95) and The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do About It, by Robert J. Shiller (Princeton University Press, 196 pp., $16.95).

In contrast to the ‘generative’ model of performativity it seems fair to characterize animal spirits as an ‘additive’ contribution to economics: if only these elements were added, the model would more closely resemble reality. Friedman summarizes the five suggested additions below (I’ve added the bold font):

“Akerlof and Shiller identify five distinct elements in what they call “animal spirits”: confidence, or the lack of it; concern for fairness, that is, for how people think they and others should behave—for example, that a hardware store shouldn’t raise the price of snow shovels after a blizzard despite the increased demand; corruption and other tendencies toward antisocial behavior; “money illusion,” meaning susceptibility to being misled by purely nominal price movements that, because of inflation or deflation, do not correspond to real values; and reliance on “stories”—for example, inspirational accounts of how the Internet led to a “new era” of productivity. The omission of these five aspects of “animal spirits,” they argue, blocks conventional economics from either understanding today’s crisis or providing useful ideas for dealing with it.”

It would be interesting to compare and contrast the thesis of animal spirits with the forthcoming translation of The Science of Passionate Interests: An Introduction to Gabriel Tarde’s Economic Anthropology, by Bruno Latour and Vincent Lepinay, due out from the University of Chicago Press this November.  The intriguing argument of that work is that, following Tarde, the economy is quantifiable precisely because it is constituted by passionate interests.

Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism
by George A. Akerlof and Robert J. Shiller

Princeton University Press, 230 pp., $24.95

The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do About It
by Robert J. Shiller

Princeton University Press, 196 pp., $16.95

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