For the past few days, I’ve been reading Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism by George Akerlof and Robert Shiller. I’ve also been feeling like over the same time span, the Obama administration has shifted its public rhetoric in the direction Akerlof and Shiller would suggest. Turns out this is not a coincidence. Michael Scherer reports:
White House Budget Director Peter Orszag is a numbers guy, a propeller head as President Obama would say. But as David Von Drehle and I write in this week’s print version of TIME, Orszag has been spending his time recently reading not about spreadsheets, but about psychology. In particular, he has been reading a new book by the economists George Akerlof and Robert Shiller called “Animal Spirits: How Human Psychology Drives The Economy, and Why It Matters For Global Capitalism.” [...]
The White House is trying to recreate a sense of confidence by pointing out all the measurements that suggest the sudden loss of confidence may be causing the same irrational result that the confidence bubble created. Of course, the White House must walk a delicate line here, for even the smartest people in the Washington do not know when the markets will stop sinking. No one can predict the animal spirits. As Obama said Thursday, “The market is going to be responding to all this information out there and, you know, the whole issue of animal spirits in the marketplace and when suddenly a rally catches, you know, you guys know that better than I do. But my focus has to be on the long term. And my long-term projections are highly optimistic — if we take care of some of these long-term structural problems.”
Reading: It’s fundamental.