IDEAS home Printed from https://ideas.repec.org/a/mes/postke/v34y2011i2p331-352.html
   My bibliography  Save this article

Keynes's animal spirits vindicated: an analysis of recent empirical and neural data on money illusion

Author

Listed:
  • Sacha Bourgeois-Gironde
  • Marianne Guille

Abstract

The tendency of people to think of money in nominal, rather than real, terms is now well documented by recent empirical data. In particular, experimental and neurobiological data provide new insights on the individual and subindividual (neurobiological processes) anchoring of money illusion. The sensitivity of the reward brain system to the nominal format of money may explain money illusion at a biological level and provide a sort of physical demonstration of Keynes animal spirits hypothesis. These findings make it more difficult to ignore the hedonic or emotional dimension of money, which lies outside the scope of homo economicus.

Suggested Citation

  • Sacha Bourgeois-Gironde & Marianne Guille, 2011. "Keynes's animal spirits vindicated: an analysis of recent empirical and neural data on money illusion," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 34(2), pages 331-352.
    • Handle: RePEc:mes:postke:v:34:y:2011:i:2:p:331-352
    DOI: 10.2753/PKE0160-3477340208
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.2753/PKE0160-3477340208
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.2753/PKE0160-3477340208?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Besancenot, Damien & Rocheteau, Guillaume & Vranceanu, Radu, 2000. "Search, Price Illusion and Welfare," Journal of Macroeconomics, Elsevier, vol. 22(1), pages 109-124, January.
    2. Cannon, Edmund & Cipriani, Giam Pietro, 2006. "Euro-Illusion: A Natural Experiment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(5), pages 1391-1403, August.
    3. George A. Akerlof, 2009. "How Human Psychology Drives the Economy and Why It Matters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1175-1175.
    4. Richard H. Thaler & Cass R. Sunstein, 2023. "Libertarian paternalism," Chapters, in: Cass R. Sunstein & Lucia A. Reisch (ed.), Research Handbook on Nudges and Society, chapter 1, pages 10-16, Edward Elgar Publishing.
    5. Christofides, Louis N. & Peng, Chen, 2006. "Contract duration and indexation in a period of real and nominal uncertainty," Labour Economics, Elsevier, vol. 13(1), pages 61-86, February.
    6. David Card & Dean Hyslop, 1997. "Does Inflation "Grease the Wheels of the Labor Market"?," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 71-122, National Bureau of Economic Research, Inc.
    7. Kooreman, Peter & Faber, Riemer P & Hofmans, Heleen M J, 2004. "Charity Donations and the Euro Introduction: Some Quasi-Experimental Evidence on Money Illusion," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(6), pages 1121-1124, December.
    8. Akerlof, George A & Yellen, Janet L, 1985. "Can Small Deviations from Rationality Make Significant Differences to Economic Equilibria?," American Economic Review, American Economic Association, vol. 75(4), pages 708-720, September.
    9. Ernst Fehr & Jean-Robert Tyran, 2001. "Does Money Illusion Matter?," American Economic Review, American Economic Association, vol. 91(5), pages 1239-1262, December.
    10. Paul Davidson, 2010. "Behavioral economists should make a turn and learn from Keynes and Post Keynesian economics," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 33(2), pages 251-254, January.
    11. Agell, Jonas & Bennmarker, Helge, 2007. "Wage incentives and wage rigidity: A representative view from within," Labour Economics, Elsevier, vol. 14(3), pages 347-369, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sacha Bourgeois-Gironde, 2021. "Has Money Transformed Our Brains? A Glimpse into Stone-Age Neuroeconomics," Annals of the Fondazione Luigi Einaudi. An Interdisciplinary Journal of Economics, History and Political Science, Fondazione Luigi Einaudi, Torino (Italy), vol. 55(1), pages 165-184, June.
    2. Darriet, Elisa & Guille, Marianne & Vergnaud, Jean-Christophe & Shimizu, Mariko, 2020. "Money illusion, financial literacy and numeracy: Experimental evidence," Journal of Economic Psychology, Elsevier, vol. 76(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Antonio J. Morales & Enrique Fatas, 2021. "Price competition and nominal illusion: experimental evidence and a behavioural model," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 12(4), pages 607-632, December.
    2. Lechthaler, Wolfgang & Mileva, Mariya, 2024. "Trade liberalization, wage inequality, and monetary policy," Journal of International Money and Finance, Elsevier, vol. 143(C).
    3. Fehr, Ernst & Tyran, Jean-Robert, 2007. "Money illusion and coordination failure," Games and Economic Behavior, Elsevier, vol. 58(2), pages 246-268, February.
    4. Tyran, Jean-Robert & Stephens, Thomas A, 2012. "?At least I didn?t lose money? Nominal Loss Aversion Shapes Evaluations of Housing Transactions," CEPR Discussion Papers 9198, C.E.P.R. Discussion Papers.
    5. Ernst Fehr & Jean-Robert Tyran, 2005. "Individual Irrationality and Aggregate Outcomes," Journal of Economic Perspectives, American Economic Association, vol. 19(4), pages 43-66, Fall.
    6. Grundmann, Susanna & Giamattei, Marcus & Lambsdorff, Johann Graf, 2019. "Intentions rather than money illusion – Why nominal changes induce real effects," European Economic Review, Elsevier, vol. 119(C), pages 166-178.
    7. Bittschi, Benjamin & Duppel, Saskia, 2015. "Did the introduction of the euro lead to money illusion? Empirical evidence from Germany," ZEW Discussion Papers 15-058, ZEW - Leibniz Centre for European Economic Research.
    8. Barno Blaes, 2008. "Ausmaß und reale Konsequenzen nach unten starrer Nominallöhne," Working Papers 048, Bavarian Graduate Program in Economics (BGPE).
    9. Fabrizio Adriani & Giancarlo Marini & Pasquale Scaramozzino, 2009. "The Inflationary Consequences of a Currency Changeover on the Catering Sector: Evidence from the Michelin Red Guide," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 111-133, February.
    10. Du Caju, Philip & Fuss, Catherine & Wintr, Ladislav, 2009. "Understanding sectoral differences in downward real wage rigidity: workforce composition, institutions, technology and competition," Working Paper Series 1006, European Central Bank.
    11. Fehr, Ernst & Goette, Lorenz, 2005. "Robustness and real consequences of nominal wage rigidity," Journal of Monetary Economics, Elsevier, vol. 52(4), pages 779-804, May.
    12. Suleyman Basak & Hongjun Yan, 2010. "Equilibrium Asset Prices and Investor Behaviour in the Presence of Money Illusion," Review of Economic Studies, Oxford University Press, vol. 77(3), pages 914-936.
    13. Blumkin, Tomer & Ruffle, Bradley J. & Ganun, Yosef, 2012. "Are income and consumption taxes ever really equivalent? Evidence from a real-effort experiment with real goods," European Economic Review, Elsevier, vol. 56(6), pages 1200-1219.
    14. Deckers Thomas & Falk Armin & Schildberg-Hörisch Hannah, 2016. "Nominal or Real? The Impact of Regional Price Levels on Satisfaction with Life," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(3), pages 1337-1358, September.
    15. Michael Ehrmann, 2011. "Inflation Developments and Perceptions after the Euro Cash Changeover," German Economic Review, Verein für Socialpolitik, vol. 12(1), pages 33-58, February.
    16. Johan Almenberg & Artashes Karapetyan, 2009. "Mental accounting in the housing market," IEW - Working Papers 453, Institute for Empirical Research in Economics - University of Zurich.
    17. Julián Messina & Cláudia Filipa Duarte & Mario Izquierdo & Philip Du Caju & Niels Lynggård Hansen, 2010. "The Incidence of Nominal and Real Wage Rigidity: An Individual-Based Sectoral Approach," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 487-496, 04-05.
    18. Thomas Beissinger & Chritoph Knoppik, 2005. "Sind Nominallöhne starr? Neuere Evidenz und wirtschaftspolitische Implikationen," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 6(2), pages 171-188, May.
    19. Helena Chytilová & Zdeněk Chytil, 2014. "Ekonomické vzdělání a peněžní iluze, experimentální přístup [Economic Education and Money Illusion: An Experimental Approach]," Politická ekonomie, Prague University of Economics and Business, vol. 2014(4), pages 500-520.
    20. Montornès, Jérémi & Sauner-Leroy, Jacques-Bernard, 2009. "Wage-setting behavior in France: additional evidence from an ad-hoc survey," Working Paper Series 1102, European Central Bank.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mes:postke:v:34:y:2011:i:2:p:331-352. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/MPKE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.