I held off on buying any of the ‘oh no’s, a financial crisis, everything we thought we knew is wrong’ books, right until I came across George Akerlof and Robert Shiller’s “Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism.” Akerlof’s work on asymmetrical information in markets (including finance) garnered a Nobel in 2001, while Shiller has been a bulwark of behavioral finance for years, publishing “Irrational Exhuberance,” a critique of the efficient markets model and a warning against the stock market bubble at its height in 2000. In addition, unlike the quick-turnaround financial manifestos that fill Borders bookshelves, Akerlof and Shiller apparently spent five years working on Animal Spirits.
So it is with great sadness that I report Animal Spirits brings very little to the table. The book is pitched as a battle against orthodox economics – represented by Milton Friedman – but the authors have appeared too late for the festivities. If they stopped by Friedman’s backyard, U of Chicago, they would have found the authors of “Nudge,” an earlier (and superior) book on behavioral economics and its implications on policy. In addition, they likely could have saved themselves some time and set aside the chapter on sticky wages and prices — or at the very least not pretended that they were presenting new ideas.
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