The Relationship Between Inflation and Unemployment in the Economy--Animal Spirits Revisited

In their book, Animal Spirits: How Human Psychology Drives the Economy and Why it Matters for Global Capitalism, George Akerlof and Robert Shiller show the relationship between inflation and unemployment.  As we move into this second decade of the new millennium, unemployment in the USA is still at 10%.  Inflation is relatively low (no social security increase for cost of living for 2010).  According to the book, zero inflation leads to an increase in unemployment.  When the economy works toward full employment, a nominal amount of inflation--with effective limits and safeguards set by the government--can be expected.

Animal Spirits, the Economy, Attitudes and Business Opportunities

A few days ago--in the last decade--I wrote a post looking at animal spirits and the influence of human psychology on the economy.  (I am now on chapter 11 of the book and it is worthwhile to read and/or listen to.)

Five of these animal spirits are confidence,  a sense of fairness, corruption, money illusion, and stories.  As we now enter the new year and the new decade, we can look for a change in how businesses look at the world.  Confidence was shaken in 2008 and in 2009. 

Many businesses can be poised to take on new business opportunities if they develop a willingness to trust and can find trusted advisers to assist them in exploring the opportunities for change.

Those of us who are in business to provide coaching and consulting services to other businesses are now challenged by the evolving animal spirits of the new economy.  What, for example, are the right fees to charge for professional services?  If we charge what we used to charge, many businesses who could use the services will not think they can afford them.  If we reduce our fees to help businesses experiencing a lower profit-margin, will they realize that these are not our standard fees and, instead, are value-added fees to assist them to grow their businesses and to take advantages of new opportunities?

Attitudes in both business and schools are often resistant to outside coaching and consulting.  Our fee structures are not the same as those many decision-makers are used to.  Some schools develop relationships with local universities or community colleges and work with their faculty and graduate students.  Businesses may have a few trusted advisers they know from their circles of business contacts.

While social networking groups such as LinkedIn may offer opportunities for new connections, referrals and personal networking seems to be the most trusted source for new insights. 

We are still evolving into this second decade of the new millennium.  The concept of animal spirits is important in terms of being aware of the influences of human psychology on business and the economy and in helping professionals working in this economy to have insight into business direction and new business opportunities.

Animal Spirits: How Human Psychology Drives the Economy and Why it Matters for Global Capitalism

In exploring Audible.com today I came across the audiobook Animal Spirits:  How Human Psychology Drives the Economy and Why it Matters for Global Capitalism by

George A. Akerlof and Robert J. Shiller.

I am still exploring the book and find it very interesting to use the filter of "animal spirits" to explore recent changes in the world's economy.  These concepts address issues of confidence, among others, and how that plays out in terms of unemployment and the economy as a whole.

I am looking for personal insights that I can use to guide my own responses to this economy.