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The start of a Keynesian Reformation?,
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This review is from: Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism (Hardcover)
A reformation is the restoration of a system of thought to the purity of its original ideas. The Keynesian Revolution in economics of the 1930s departed from the economic orthodoxy of its time partly by stressing the importance to the economy of emotional drives - "animal spirits" . Arkelof and Schiller describe how Keynesian economics was emasculated by the relegation of animal spirits to a minor role, in an effort to make it more palatable to classical economists . The authors argue there is now sufficient evidence to prove the importance of animal spirits beyond doubt, and the resulting re-invigorated Keynesian economics should be sufficient to encourage and legitimise government policy makers to implement measures of sufficient boldness to get us out of the current economic crises. I summarise the ground covered in this book in more detail in an article on wiki.
This book is written in a clear and accessible style, and should appeal to the general reader seeking to understand the reasons for the current financial cries, or just looking to deepen their understanding of the economy in general. The authors extol the virtues of the free market and are against excessive government control, but they make a powerful case for more robust intervention than has been fashionable in western economies for the past few decades. I hope this book is widely read by both policy makers and economists, and has the desired effect in boosting Keynesian influences on political decision making so the current crises can be quickly contained and replaced by a more stable and fairer economy.
I have a few concerns about the books style and lack of polish. The preface is bold and compelling, yet most of the following chapters lack energy and rigour. Its easy to see it was written more than a year back when the neoliberal view point was orthodox, and thus the authors did not feel entitled to argue as confidently as they might today. Shiller in particular is entitled to speak with authority as he was one of the few prominent economists to speak out strongly in favour of Keynesian solutions in the crucial early months of 2008, where if the then still strong free market orthodoxy had not been driven back we'd be in a far worse state than we are now (see my wikki article on the Keynesian Resurgence) While the frequent use of stories to support their positions makes the book a quick and easily digestible read, it would have been greatly strengthened by less sparse use of numerical data and charts, and especially by greater references to the work of others in behavioural economics and other relevant areas. I like authors to often use the feminine pronoun instead of the traditional masculine or the clumsy he / she , but its jarring when they do it all the time and if one's going to feminise 'joe public' , is it necessary to use Josepha rather than the cooler Jo or the more pleasing Josephine? Well perhaps the authors know best how to pitch the book to persuade their fellow Americans, and they felt the urgent need for their message justified rushing to publicise. I hope they will soon release a second edition which will at least be more generously referenced. The message is spot on, I hope the presentation is sufficiently strong for the book to have the revolutionary effect it deserves to.