Acclaimed economist Robert Shiller challenges the economic wisdom that got us into the current financial mess, and puts forward a bold new vision to transform economics and restore prosperity. The global financial crisis has made it clear that powerful psychological forces are imperilling the wealth of nations today. From blind faith in ever-rising housing prices to plummeting confidence in capital markets, ‘animal spirits’ are driving financial events worldwide.
Shiller reasserts the necessity of an active government role in economic policymaking by recovering the idea of ‘animal spirits’, a term John Maynard Keynes used to describe the gloom and despondence that led to the Great Depression and the changing psychology that accompanied recovery. Managing these animal spirits argues Shiller, requires the steady hand of government - simply allowing markets to work won’t do it.
In rebuilding the case for a more robust, behaviourally informed Keynesianism, Shiller looks at the most pervasive effects of animal spirits in today’s economic life - confidence, fear, bad faith, corruption, and a concern for fairness - showing how Reaganomics, Thatcherism, and the rational expectations revolution failed to account for them.