I think it’s important for any business person to have a basic understand of economics. In light of the recent talk of unemployment, inflation (or deflation) and government bailouts I realized how much I didn’t know. So lately, I’ve been trying to educate myself. I don’t want to be caught off-guard and not really understand what going on around me.


The other day I picked up a book on the subject called “Animal Spirits” by Akerlof and Shiller. The book seeks to describe how what they call “animal spirits” contribute to the performance of the macroeconomy. The first half of the book is devoted to defining these animal spirits and the second half to answering a number of questions in light of them (i.e. why is there an inflation / unemployment trade-off?).


Here’s a list of the animal spirits:


•- Confidence and Multipliers

•- Fairness

•- Corruption and Bad Faith

•- Money Illusion

•- Stories


One animal spirit I thought was interesting was “Money Illusion”. They define money illusion as making decisions based on nominal dollars. In other words, not taking inflation / deflation into account. The authors then go on to give numerous examples of how this illusion affects the economy as a whole.


What’s my point other than pointing out a good book? As a business owner, there are many things that we DON’T know. Do you understand the basic economic indicators and what they mean? We should all be striving to understand the economy around us so we can take advantage of opportunities or at least even know they exist. That takes time, focus and discipline learning new things. Stretching our minds…