Wednesday, February 3, 2010

Quick Take: Robert Shiller on Economic Mood

In my never-ending quest to make economics into something more real, I find another ally. Robert Shiller writes of how "mood" affects an economy in his recent NYT article. Shiller notes how recessions and (yes, we must talk about them) depressions gain steam; indeed, one might summarize his argument by saying that depression (personal) creates depressions (economic). He cites an upcoming work by George Akerlof that "self-esteem" and "identify" affect economics. My goodness! What heresy! Not just money, money, money? (Of course, you're right, some do respond that way: many of our friends on Wall Street seem confirm this trait.) Schiller also cites a recent talk by Samuel Bowles ("Machiavelli's Mistake"—not sure that this is an appropriate title for Bowles to have chosen) suggesting that self-interest alone could fuel a high performance economy. All of this makes sense to me. Precedents? Start with Thucydides.

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