Why do economies fall into depression? 2. Why do central bankers have power over the economy (insofar as they do)? 3. Why are there people who cannot find jobs? 4. Why is there a trade-off between inflation and unemployment in the long run? 5. Why is saving for the future so arbitrary? 6. Why are financial prices and corporate investments so volatile? 7. Why do real estate markets go through cycles? 8. Why is there special poverty among minorities? Traditional economic theory argues that individuals act rationally and make economic decisions based on economic reasons. However, traditional economic theory fails to examine how the economy behaves when individuals make rational decisions based on non-economic reasons. And it fails to take into account that people are irrational or misguided. On the other hand, John Maynard Keynes emphasized the importance of animal spirits and their fundamental …show more content…
It puts much significance on the importance of understanding how someone’s emotions can have effect on the economy. It allows the readers to grasp the idea due to the many examples that the authors use. For example, they use the recession of 1990-1991, the recession of 2001, and the recession of 2007 to explain the corruption and bad faith, which is one of the animal spirits. These events are an example that the business cycle is “connected to fluctuations in personal commitment to principles of good behavior and to fluctuations in predatory activity, which in turn is related to changes in opportunities for such activity (Akerlof and Shiller 2009,38). Moreover, this is a good read because it can be understandable for anyone. You do not to be an economist or have lots of knowledge about the economy to understand the concepts and what the authors are trying to claim. It is an easy book to follow and it is simple to understand. The authors explain how the economy works and functions by using past economic theories and comparing them to their new theory. They provide clear explanations and extensive documentations allowing the readers to continue to be engaged. Also, Akerlof and Shiller references both aspects of the argument, they do not just talk about their perspectives, but they also bring forth arguments that contradict their claims. It gives the readers more than one