Animal Spirits: Highlights Segment

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Traditional economics are instrumental to our understanding of the world and the economy that runs it. However, as authors George A. Akerlof and Robert Shiller attest in their book Animal Spirits, a major economic influencer is missing if we only look at traditional economics to find the problems the economy faces. That missing element is animal spirits, which obviously inspired their books title. The so-called animal spirits consist of five major drivers; confidence, fairness, corruption, money illusion, and stories. Essentially, the authors are arguing that tradition economics look at people as completely rational beings, which is simply a fairytale. Humans have emotions, and we can be irrationally influenced by these emotions. The authors argue that the irrationalities that humans possess are the cause of many of the problems we face in the world of economics today, including the recent recession of 2008, and in the staggering statistics behind poverty in minorities.
One of the most thought provoking chapters in this book was chapter thirteen, titled “Why Is There Special Poverty among Minorities?” This chapter tackles the issues of why in a world of supposed equality, there still seems to be a troubling level of inequality, specifically with African-Americans. The facts and statistics are shocking and horrific. While only about 10% of whites and Hispanics are unemployed, 25% of African-Americans are without jobs (Shiller 163). “Appallingly, the lifetime chances of a black male youth entering prison exceed 25% (Shiller 158)”. The poverty rate of African-Americans is triple that of whites (Shiller 157). From simply observing those numbers, it is easy to see that something is hindering African-Americans, and animal spirits hel...

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...al statistics between blacks and white can be attributed to the animal spirits, specifically confidence, fairness and stories. These animal spirits have served as explanations for many of the problems the world has faced, especially in terms of economics. Recessions have taken place due to lack of confidence, or as in the recent housing bubble crash, overconfidence. Unemployment can take place due to perceptions of fairness. And, as seen in Boyz in the Hood, stories can cause people to fall into unfortunate situations. When we account for animal spirits, we can start to find reasons behind why certain occurrences take place. In using animal spirits, it is important to remember that humans are not rational beings. We have emotions, passions and interests that can cause us to act irrationally. As irrational beings, we need animal spirits, not traditional economics.

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