Traditional economics is central 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, if we look only at traditional economics to find the problems facing the economy, a major economic influencing factor is missing. The missing element is animal spirits, which obviously inspired the title of their book. The so-called animal spirits are made up of five main factors; trust, fairness, corruption, monetary illusion and stories. In essence, the authors argue that mainstream economics treats people as completely rational beings, which is simply a fairy tale. Human beings have emotions and we can be irrationally influenced by these emotions. The authors argue that irrationalities possessed by humans are the cause of many of the problems we face in economics today, including the recent 2008 recession and staggering minority poverty statistics. One of the most thought-provoking chapters in this book was chapter thirteen, titled “Why Is There Special Poverty Among Minorities?” This chapter addresses the question of why in a world of supposed equality there still appears to be a troubling level of inequality, particularly among African Americans. The facts and statistics are shocking and horrifying. While only about 10% of whites and Hispanics are unemployed, 25% of African Americans are jobless (Shiller 163). “Shockingly, a young black male’s lifetime chance of entering prison exceeds 25% (Shiller 158).” The poverty rate for African Americans is three times that of whites (Shiller 157). By simply looking at these numbers, it's easy to see that something is holding African Americans back, and animal spirits help... middle of paper... all the statistics between blacks and whites can be attributed to animal spirits, especially trust , fairness and stories. These animal spirits have served as an explanation for many of the problems the world has faced, especially in economic terms. Recessions have occurred because of a lack of confidence or, as in the recent collapse of the housing bubble, overconfidence. Unemployment can occur due to perceptions of fairness. And, as seen in Boyz in the Hood, stories can cause people to fall into unfortunate situations. When we consider animal spirits, we can begin to find reasons why certain events occur. When using animal spirits, it is important to remember that humans are not rational beings. We have emotions, passions and interests that can lead us to act irrationally. As irrational beings, we need animal spirits, not traditional economics.
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