The economy's animal spirits (Gittins - SMH)

An excellent article by Ross Gittins on the deeper psychological factors driving booms and busts.

"... it's taken the global financial crisis to help us rediscover that truth: the main reason economies fluctuate as they do is the changing psychology of the people who compose the economy."

"Akerlof and Shiller acknowledge confidence as the cornerstone of animal spirits, but argue they have four other components: fairness, corruption and bad faith, money illusion and stories. These other elements are needed to adequately explain the economy's ups and downs, and catastrophic events such as the global financial crisis."

"The human mind is built to think in terms of narratives, of sequences of events with an internal logic and dynamic that appear as a unified whole. And much human motivation comes from living through a story of our lives that we tell ourselves. The same is true for confidence in a nation, a company or an institution. Great leaders are first and foremost creators of stories."