Akerlof and shiller animal spirits
This presentation is the property of its rightful owner.
Sponsored Links
1 / 3

Akerlof and Shiller , Animal Spirits PowerPoint PPT Presentation


  • 43 Views
  • Uploaded on
  • Presentation posted in: General

Akerlof and Shiller , Animal Spirits. Confidence – Keynes- Minsky Hopes, Exuberance, Fears Waves of optimism and pessimism Corruption - Bad Faith  Loss of Trust S&Ls – Enron – Sub-prime Fairness Punish cheaters, even at own expense Relative position Money illusion

Download Presentation

Akerlof and Shiller , Animal Spirits

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Akerlof and shiller animal spirits

Akerlof and Shiller, Animal Spirits

  • Confidence – Keynes-Minsky

    • Hopes, Exuberance, Fears

    • Waves of optimism and pessimism

  • Corruption - Bad Faith  Loss of Trust

    • S&Ls – Enron – Sub-prime

  • Fairness

    • Punish cheaters, even at own expense

    • Relative position

  • Money illusion

    • “Illusion” is real in view of nominal contracts/accounts

  • Stories

    • New eras – Irrational exuberance

  • Downward wage rigidity


    Akerlof and shiller a brief history of macroeconomics

    Akerlof and Shiller: A brief history of macroeconomics

    • Pre – Keynes: Say’s Law  Automatic adjustment to full employment

    • Keynes: Animal spirits  Excesses Inherent instability

      Minsky, JMK, Stabilizing an Unstable Economy, Can “It” Happen Again?

    • Hicks: IS – LM  Keynes without animal spirits

      • Consumption function – Liquidity preference function

  • Hydraulic Keynesians

    • Original Phillips Curve  Policy Menu

  • Friedman: Monetarist counter-revolution

    • Dispense with money illusion/enter expectations/natural rate

       Wage Setting: W = PeF(u,z)

  • New Classical Economics

    • Rational expectations

    • Real business cycles (dynamic stochastic general equilibrium)

  • New Keynesian Economics

    • Rational expectations – but sticky adaptation


  • Akerlof and shiller prescription for today

    Akerlof and Shiller: Prescription for Today

    • A Second Target – A Credit Target

      “It is fairly easy now to project the fiscal and monetary stimulus necessary for aggregate demand to be at full employment—if financial markets are freely flowing…But, with the loss of confidence in the financial sector, macroeconomic planners must have a second target…—the amount of credit that would normally be given [to qualified borrowers] if the economy were at full employment.”

      Methods: Discount window (TALF)/Capital injections/GSEs

      • Gotta replace the fallen Humpty-Dumpty (Securitization)

  • A Credit Target—Whom to credit?

    • Bernanke and Blinder (1988) Credit, Money and Aggregate Demand, AER, May.

      • In liquidity trap, expansion of credit is effective stimulus

        Aside: Also in AER, May 1988. Akerlof and Yellen, Fairness and Unemployment

        “…where it is advantageous to pay some employees highly, it is also … fair to pay other employees well.” Unfair pay  shirking


  • Login