Animal Spirits – How Human Psychology Drives the Economy, and Why it Matters for Global Capitalism

Abstract

Neoclassical economics states that economic decisions about human behavior are based on figures, statistics, and assumptions, and that rational decisions made on the basis of these assumptions do not change under different emotional conditions.However, as Amos Tversky and Daniel Kahneman stated in their studies in 1974 and Prospect Theory in 1979, people have only limited rationality with heuristics and biases.While neoclassical economic assumptions prevents economics from being a true social science, behavioral economics tries to explain economic events by understanding people without isolating them from economics.The book entitled "Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism, " written by George A. Akerlof and Robert J. Shiller and published in 2009, deals with the factors affecting individuals in the decision-making process with a perspective other than neoclassical economic theory.In the first section of the two-part book, five basic motives (trust, justice, corruption, money illusion, and stories) are explained, while in the second section, eight questions about the economy are answered within the framework of these animal motivations.The importance of the book is its inclusion of animal motives in the economy that current theory fails to do so.In the book, while the econometric and statisticsbased models used by neoclassical economic theory to explain assumptions and economic phenomena are criticized, behavioral economic theory is put in its place.