Brief Summary Of Animal Spirits By Robert J. Shiller

1. Brief Summary
Animal Spirits was written in October 2009 (Akerlof and Shiller 2009: xv). George A. Akerlof, one of the authors, is a professor at the University of California. He won a Nobel Prize (Akerlof and Shiller 2009: back cover of the book). The other author, Robert J. Shiller is a best-selling author (Akerlof and Shiller 2009: back cover of the book). On the whole, the book is about how the free-market system works. The term animal spirits has been neglected by macroeconomics because it is difficult to create a definition for it (Akerlof and Shiller 2009: vii). The book proposes that the free-market economy needs to be reinvented. Moreover, it argues that individuals need a creative business sprit in their minds, and their attitudes …show more content…
It states what “elements of our theory of animal spirits includes confidence, fairness, corruption, money illusion and storytelling” (Akerlof and Shiller 2009: 156). The second part of the book “describes how these five animal spirits affect economic decisions and how they play a role in answering certain questions.” (Akerlof and Shiller 2009: 6). These questions deal with economic depressions, the power of central banks, the unemployed, inflation, saving, prices and investments, real estate markets and poverty (Akerlof and Shiller 2009: 6). The book addresses why an understanding of animal spirits is useful for understanding how the economy is governed. The writers include the standpoint of economists, which is that they believe that if individuals were able to be rational, their choices would be influenced only by what they could buy or sell in the market (Akerlof and Shiller 2009: 41). Another accomplishment of the book is that it explains how money illusion, one of the five animal spirits, plays a key role in influencing the minds of individuals. This is evident through the following statement: “Bryon...(argued) that the expansion of the money supply, causing inflation, would benefit everyone – as if debtors could be helped by inflation without harming creditors” (Akerlof and Shiller 2009: 62). The book states why animal spirits are necessary. This is done through the following statements: they “explain the puzzle of arbitrariness and variability of saving. And understanding these animal spirits is in turn critical to the design of national policies on saving” (Akerlof and Shiller 2009: 130). Another statement which explains why animal spirits are necessary is: “to understand why the economy fluctuates so much and why there is involuntary unemployment” (Akerlof and