In maintaining that ethics could no longer be done entirely a priori, David Brooks apparently sent the philosophy blogsphere into something of a spin. (Of course, the piece was entitled “The End of Philosophy.”) Anyway, discussion of that was such fun, I thought I’d draw your attention to another attack on the idea of human rationality, even though I haven’t read the book, Animal Spirits How Human Psychology Drives the Economy and Why It Matters for Global Capitalism. From a review:
Akerlof, a Nobel laureate, and Shiller, a good bet to become one, are prominent mainstream economists. They don’t deviate easily from orthodox theory, with its allegiance to the proposition that people are essentially rational, well informed and unemotional in the numerous transactions that shape the economy. But in “Animal Spirits,” they have deviated — and they have done so just as mainstream theory self-destructs.
There was nothing rational, well informed or unemotional about the behavior that has all but collapsed the economy. That leaves most of America’s economists without a believable framework for explaining how we got into this mess. Akerlof and Shiller are the first to try to rework economic theory for our times. The effort itself makes their book a milestone. …
…And their book takes their case not just to economists, but also to the general reader. It is short (176 pages of text) and easy enough for laymen to understand (most of the time).
Above all, they challenge the reigning free-market ideology of the past 30 years or so, from the rise of Margaret Thatcher and Ronald Reagan to the abrupt arrival of the present crisis late last year. That ideology held that markets should operate free of government because they were rational. But if animal spirits influence behavior, then government must play a broad, disciplinary role, and do so permanently. (My stress.)
Keynes apparently saw a lot of this, but the role he gave to animal spirits got written out of economics. So now we’ve had experiments with a comparatively unregulated market, and even those benefitting up to now should have some sense something went awfully wrong. Well, those other than the conservatives on US radio and TV who are now blaming the mess of Obama.