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Psychological barriers to a healthy economy

Book Review: 'Animal Spirits'

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Book review Title: "Animal Spirits: How Human Psychology Drives the Economy, and Why it Matters for Global Capitalism." Author: George A. Akerlof and Robert J. Shiller Publisher: Princeton University Press, 230 pages, $24.95 list ($16.47 on Audio interview: Click here to hear an audio interview with co-author Robert J. Shiller. Ever wonder why a seemingly slam-dunk deal suddenly gets thrown off the rails even though none of the terms have changed? Perhaps you should blame "animal spirits" gone awry, a term economist John Maynard Keynes coined in the middle of the Great Depression to describe the type of "naive optimism" that is a necessary ingredient for businesses to invest, for entrepreneurs to take risks -- and for potential homebuyers to sign those documents at the closing table. Left to their own devices, however, these same spirits can fall dramatically, thus becoming a psychological barrier to a properly functioning ec...