A bull market is a random market movement that causes an investor to mistake himself for a financial genius. It's a joke that illustrates the irrational animal forces that drive markets.

In this book, the University of California's Akerlof and Shiller, best-selling author and professor of economics at Yale University, argue that that economists have ignored these forces and have dismissed them as irrelevant. Which in itself might explain why no economist, with the exception of an irascible handful, foresaw the greatest financial catastrophe since the Great Depression.

Shiller and Akerlof base their arguments on the claim put forward by John Maynard Keynes in 1936 in his book The General Theory of Employment, Interest and Money. Keynes said investors based their decisions on "animal spirits" and a "spontaneous urge to action". Contrary to rational economic theory, Keynes said, they are not the "outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities."

Shiller and Akerlof take this one step further, identifying five animal forces that drive investment decisions: confidence, fairness, corruption and anti social behavior and money illusion and stories we tell each about the market, implausible stories that are taken to be gospel truth. Like, for example, the view that property prices will continue to rise because there is only so much land available.

While economists like to depict markets as efficient and investors as rational calculators, the animal forces are anything but. The word "confidence", for example, comes from the Latin word "fido" which means "I trust". And while we are in a credit crisis, it is worth remembering that the word "credit" is derived from the Latin word "credo" meaning "I believe".

And so when people are confident, they go out and buy but their decisions are not based on a quantitative analysis of the earnings of business 10 years from now. Similarly, when they lose confidence, they withdraw. The irrationality of confidence explains the Great Tulip Bubble of seventeenth century Netherlands, a land often caricatured as the home of the world's most cautious people. It also explains how Sir Isaac Newton, the father of modern physics and the calculus, lost a fortune in the South Sea bubble.

The problem with confidence, whether it's too much or too little, is that it become a contagion, building on itself in the same way as Keynes "multiplier" for the impact of government stimulus packages. "Epidemics of confidence or epidemics of pessimism may arise mysteriously simply because there was a change in the contagion rate of certain modes of thinking."

The authors say that perceptions of fairness also affect our decisions because they are "related to our sense of confidence and our ability to work effectively together".

They also point that before every downturn, there has been outbreaks of corruption or bad faith. In the 1920s during the lead up to the Depression, for instance, prohibition led to a growing disrespect for law and civil society. The 1991 recession was preceded by the savings and loan (S&L) crisis, the 2001 recession by Enron and the latest by the totally amoral selling of subprime mortgages to people who would never be able to repay them, and their securitization in packages that were given AAA ratings.

Significantly, each downturn leads to a shift in values. During the Depression, contract bridge became a popular game, so popular that 44% of US households played it. Anyone who has played bridge knows that it's a social game where people have to co-operate. It's rarely played for money. Interestingly, contract bridge went into serious decline during the boom. In contrast, poker or the twenty-first century variation Texas hold 'em has surged in popularity. Poker is played by individuals looking out for themselves, and the emphasis is on bluffing and deception.

Maybe there will be return to bridge with this recession. But what's really needed, the authors say, is some sort of system that harnesses these animal drivers without creating bubbles and without selling them snake oil. Given that these animal drivers will be around long after this recovery comes, it will be important to make sure we have systems in place that prick the next bubble.