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On two recent attempts to introduce animal spirits in macroeconomics: Heresy or enlightened church reform?

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  • Teodoro Dario Togati

    (Universita' di Torino, Italy)

Abstract

As noted by Alan Greenspan in 2008, one key flaw in standard models is that they treat animal spirits as a simple ‘add factor’ rather than as a structural one. This paper evaluates the extent to which two recent approaches placing the emphasis on animal spirits – namely Farmer’s ‘Neo-Paleo-Keynesian’ (NPK) project and Akerlof and Shiller’s behavioural approach – manage to overcome this flaw. By following the powerful religious metaphor introduced by Farmer, according to which general equilibrium theory underlying standard models should be regarded as a ‘church’, this paper stresses two points. First, animal spirits turn out to be devilish features that are inconsistent with the church’s commandments. Second, by trying to reconcile them with the church, these two approaches are unable to truly reform it as required by Greenspan; rather, they appear to be heretical stances that are forced to violate some fundamental dogmas of the church.

Suggested Citation

  • Teodoro Dario Togati, 2021. "On two recent attempts to introduce animal spirits in macroeconomics: Heresy or enlightened church reform?," PSL Quarterly Review, Economia civile, vol. 74(296), pages 51-73.
    • Handle: RePEc:psl:pslqrr:2021:13
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    File URL: https://rosa.uniroma1.it/rosa04/psl_quarterly_review/article/view/17485/16697
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    References listed on IDEAS

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    1. Roncaglia,Alessandro, 2019. "The Age of Fragmentation," Cambridge Books, Cambridge University Press, number 9781108745819, January.
    2. Teodoro Dario Togati, 2020. "Ulysses’ journey home to Ithaca: a new metaphor for understanding the General Theory," Cambridge Journal of Economics, Oxford University Press, vol. 44(6), pages 1395-1414.
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    10. Teodoro Dario Togati, 2019. "How can we restore the generality of the General Theory?," Cambridge Journal of Economics, Oxford University Press, vol. 43(5), pages 1397-1415.
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    More about this item

    Keywords

    Animal spirits; general equilibrium; research programmes; Keynesian economics; macroeconomic models;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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