I would like to start in my blog a new set of discourse, titled “Readings” – which I intend to share with readers a sort of book review of whatever book that I have finished reading. The purpose is to encourage more people to spend their time reading books that are of quality as well increase our overall understandings of many things happening in the world today. I hope you all can share your thoughts as well as recommendations on any books that you have read, and your comments on the books that I mentioned. Hopefully, we all can continue to enlighten ourselves with more food for thoughts.

In this article, I would like to share a book by George A. Akerlof and Robert J. Shiller, aptly titled “Animal Spirits” – which terms they have borrowed from the great economist of the last century, John Maynard Keynes. Troubled by all the elegant economic theories, Keynes raised an element which to him, was a source of discomfort and many times makes economic predictions to miss their major points – which is the human behaviour that transcends the “rationality” and “market efficiency” that economist by default assumed to be true. This is the core argument of the Book.

Both Akerlof and Shiller are the founders of a “new school” of behavioural economics, which ascribed to the fact that markets are “not that efficient” and “not that rational” as commonly thought or assumed. Akerlof himself is among the pioneer of economics of information asymmetry, with his first seminal article, titled “Markets for Lemons” – for which he was awarded with the Nobel Prize for Economics in 2001 (together with Joseph Stiglitz – on the same subject). Shiller on the other hand is the earlier proponent of “behavioural economics” and has since published numerous books such as “Irrational Exuberance” and others. Both are in fact very established and renowned economist of today.

While written as an economic text, the book is quite easy and simple in the sense that they avoided any rigorous proof of their hypothesis using the “Greeks” that economist usually employ in their writings. The book started with the key elements of “animal spirits” in the markets, namely on the question of “market confidence”, and how a feedback system works. Then they address the question of how “fairness” is ultra important in the market scene, and how “corruption and bad faith” erodes market efficiency. Furthermore, they also brought along a very “old” debate between Paul A. Samuelson (Akerlof’s teacher) and Milton Friedman (of the Chicago School) about “money illusion” – which to the authors, is still alive and kicking in the current economic environment.

Then the authors go on to explain how these “animal spirits” help us to understand eight major questions that the economists have failed to answer with satisfaction. Among others the questions are about “business cycle” and “economic depressions”. “Why central bankers have a role over the economy” and “why do we see so much fluctuations in asset prices (such as stock markets)”, and so on.

The way the arguments were laid out is quite elegant and easy to understand, even for those with little economic theoretical background. Furthermore, the authors also relates their arguments with the recent economic crisis and “scandals” in the US and Global economy. And finally, at the end of their argument – which is quite interesting, that they still believe that capitalism is the only economic system that is applicable to mankind. But unfettered capitalism as being practiced is prone to error because of “animal spirits”.
Therefore, capitalism by itself is not the best solution, but rather a second best solution.

This argument somewhat match my own personal view that capitalism provides us with many tools that otherwise we might not have; but by itself, is mired with errors. This is exactly what Imam Al Ghazally has preached (in my earlier article: “Deliverance from error”) that we must realize whatever that we have (found or believe) are still prone to errors – therefore we must always be on the path of improvement and on guard against our own weakness; and never at ease with our own findings of the “truth”.

The book is available in most bookstores. I have bought mine at Kinokuniya KLCC, in hardback, 230 pages, for a price of RM99.63 – under economics section. Have a happy reading.



  1. Salam Dr Wan Hasni. I’m a malaysian currently residing in Saudi. I’ve just finished my degree in medicine. I’m going to start my housemanship in Malaysia insyaallah.

    I’ve finished with the book animal spirits that you recommended. It was a good read. Could you please recommend me on other books concerning economy and finance, and how do I comprehend and prepare myself financially, against the economic and financial challenges of the modern world. Thank you.

    1. Dear Nasrullah

      I would recommend books by Nassim Nicholas Taleb or Talib. He is an American Lebanese, with background in econ and finance. However, his writings are controversial in the sense that his views are against the existing trend. In fact, his predictions came true in the form of last financial crisis in the US and Europe.

      His books: Black Swan, Fooled by Randomness.

      Happy reading

      Wan Hasni

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