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We Don’t Need “Animal Spirits” to Understand Economics

April 3, 2014 in Economics

By Mises Updates


Per Bylund writes in today’s Mises Daily: 

At least Aziz here acknowledges where economics went wrong: John Maynard Keynes. Getting “better” here translates to doing more of the type of cheap psychological and mathematical analyses that psychologists and mathematicians would be embarrassed to even consider. And, of course, constructing indices of aggregates of what is not “easily quantifiable” appears to be completely unproblematic to Aziz. Just like the “gut decisions” that we somehow need to understand to figure out the economy.

It is perhaps interesting to understand what sort of “gut decisions” made people purchase blue rather than green sweaters on that one sunny day, but it is rather irrelevant for the fact that quantity demanded of blue sweaters increased and that of green sweaters decreased — and that this caused changes to relative prices, the production structure, etc.

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