You may think economics is beyond you. I know I thought that I really understood it but Economics turns out to have been the only subject that I nearly failed in grad school. Why? I still don’t have an answer to that question, but this video may help you understand economics in a new light.

Robert Shiller is the Arthur M. Okun Professor of Economics at Yale University. In this 7 minute video interview from the McKinsey Qurterly, he describes the role played in our economy by “animal spirits,” the subject of his new book written with George A. Akerlof, the Koshland Professor of Economics at the University of California, Berkeley. The text below is adapted from Animal Spirits.

Adam Smith saw that human beings rationally pursue their economic interests, and his economic theories explain what happens when they do. But they are also guided by noneconomic motives—“animal spirits”—which Adam Smith and his followers largely ignore. Sometimes people are irrational, wrong, shortsighted, or evil; sometimes they act for action’s sake; and sometimes they uphold noneconomic values like fairness, honor, or righteousness.

The research is pretty clear. We make totally irrational emotional decisions about almost everything – unless it is insignificant and then we let logic rule. However, once we have made that instant emotional response, we let our minds believe it is analytical and devise reasons to “make it so”. (While a google search will come up with a number of articles on this, I am still trying to locate the source that I prefer to reference.)

Theoretical economists who struggle to understand how people handle uncertainty seem to be converging on behavioral economics. Jack: Straight from the Gut, the title of the autobiography of former GE chairman Jack Welch, sums up this reality: investment decisions are intuitive, not analytical. Intuition, a social process, follows the laws of psychology—indeed, of social psychology. Asking why capital expenditure fluctuates from year to year is a bit like asking why beer consumption fluctuates from one poker party to another.

What all this got to do with Eclectic and Sustainable Change?

We talk about planning change as if we can take into account all the facors. Even if we could anticipate all the possble logical and some of the emotional reactons and develop contingency plans, it may be a futile effort”. (This following in fact not the original quote from To A Mouse by Robbie Burns but the colloquial phase. The proper verse can be listened to by clicking this link.)

The best-laid plans of mice and men often go awry.

Even we really want to see meaningful change we had better start figuring ways to tap unto the human spirit and passion through genuine engagement.

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