Soar With the Eagles
My RSS Feeds
Understanding how the economy went bust
posted Friday, 16 October 2009
Nobel Prize winning economist George Akerlof and colleague Robert Shiller have been making waves, and a great deal of sense, with their new collaboration, Animal Spirits. The subtitle – How Human Psychology Drives the Economy – attracted my attention because a great deal of my work in guiding small business owners and employed professionals to success hinges on understanding the psychology of the situation, rather than just the numbers. [I have colleagues who I recommend for the numbers.] These two are only the latest, and most comprehensive, attack on the guiding principle of economics – that people act in rational self-interest. That this obvious untruth still has a hold on business thinking is a true testament to one of the guiding forces of psychology, which is that people tenaciously hold on to beliefs that fit their self-image, regardless of how much data there may be to the contrary. As Al Gore quoted in his own Nobel Prize winning documentary, An Inconvenient Truth, it is impossible for a person to understand something if his livelihood relies on his NOT understanding it. So the profession of economics is hobbled by its ideology and those that we rely on to not let the entire economy melt down cannot do their jobs. It is very interesting reading, albeit very dry in places, and worth add to your list for your next library trip.
comments