Does Akerlof and Shiller's Animal Spirits Provide a Helpful New Approach for Macroeconomics?

Abstract

Animal Spirits (2009) is a timely and widely appreciated work focusing on the need to incorporate behavioral factors in macroeconomic analysis that draws on a famous reference of John Maynard Keynes. Nonetheless, it has a number of limitations. Those in several chapters are noted. Most important, however, the book does not break down "animal spirits" into its components, and distinguish sufficiently between (1) cognitive, (2) emotional, (3) cultural, and (4) visceral factors, or (5) those emanating from neuroeconomics. There is not enough reference to the advances of behavioral microeconomics and there is no explanation why so little progress has been made in behavioral macroeconomics despite approximately fifteen years of efforts.

Keywords: Animal Spirits, Behavioral Economics, Financial and Economic Crisis

JEL Classification: E0, E2, G0, Z0