Global Economics

A Glimmer of Trust


Robert Shiller, professor of economics at Yale University

Photograph by Ramin Talaie/Bloomberg

Robert Shiller, professor of economics at Yale University

The business cycle is in good part driven by animal spirits. There are good times when people have substantial trust and associated feelings that contribute to an environment of confidence. They make decisions spontaneously. They believe instinctively that they will be successful, and they suspend their suspicions. As long as large groups of people remain trusting, people’s somewhat rash, impulsive decision-making is not discovered.

—Robert J. Shiller: “Animal Spirits Depend on Trust: The proposed stimulus isn’t big enough to restore confidence,” the Wall Street Journal, Jan. 27, 2009

Instinctively …

The above simply touches upon the wonderful effort by Shiller and the laureate George A. Akerlof: Animal Spirits: How Human Psychology Drives the Economy and Why It Matters for Global Capitalism.

I am exuberant about Animal Spirits and suggest you read it soonest.

The profound insight in the above is the phrase, “they suspend their suspicions.” That insight permeates all the best of Akerlof and Shiller and so many, many others of economics. (Samuelson, Sharpe, Spence, Stiglitz, and Summers just to pick a letter.)

Economists know to drift away from the easy and obvious and to think and understand the human condition from the less-obvious. It is harder to think as they do.

There is math and statistics around this idea under a Type I and Type II rubric: What you need to know is to search for the subtle, gentle negative when reading economics.

Suspend suspicions.

Suspend suggests our natural state is a spirit of doubt—of a lesser trust. (Memo: Read Thomas Hobbes’s Leviathan by Nov. 6, say 10:52 p.m.)

To get to spirit, investment, jobs, and a certain Morning in the OECD, we must and need to move from our natural state of distrust and “discover” trust.

2013 beckons. There are green shoots of data suggesting a kindling of spontaneity.

Read Akerlof and Shiller. In this October, there is a glimmer of trust. Discuss.

Keene hosts Bloomberg Surveillance 7-10 a.m. ET on 1130 AM in the New York metro area and nationally on SiriusXM 113.

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