Animal spirits is a term used by John Maynard Keynes in his 1936 book The General Theory of Employment, Interest and Money to describe the instincts, proclivities and emotions that seemingly influence human behavior, which can be measured in terms of consumer confidence. The concept has also been discussed in behavioral economics and social psychology, where it is used to explain how collective emotions and instincts can drive decision-making beyond rational calculation.
Use by Keynes
The original passage by Keynes reads:
Earlier uses
Philosophy and social science The notion of animal spirits has been described by René Descartes, Isaac Newton, and other scientists as how the notion of the vitality of the body is used.
In one of his letters about light, Newton wrote that animated spirits live in "the brain, nerves, and muscles, [which] may become a convenient vessel to hold so subtle a spirit." These spirits, as described by Newton, are animated spirits of an ethereal nature, relating to life in the body. Later, it became a concept that acquired a psychological content, but was always thought of in connection with the life processes of the body. Therefore, they retained a lower overall animal status.Hypothesis explaining the properties of light Thomas Birch, The History of the Royal Society, vol. 3 (London: 1757), pp. 247-305.
William Safire explored the origins of the phrase in his 2009 article "On Language: 'Animal Spirits'":
Thomas Hobbes used the phrase "animal spirits" to refer to passive emotions and instincts, as well as natural functions like breathing.
Ralph Waldo Emerson in Society and Solitude (1870) wrote of "animal spirits" as prompting people to action, in a broader sense than Keynes's:
In social science, Karl Marx refers to "animal spirits" in the 1887 English translation of Capital, Volume 1. Marx speaks of the animal spirits of the workers, which he believes a capitalist can either impel by encouraging social interaction and competition within their factory or depress by adopting assembly-line work whereby the worker repeats a single task.
Earlier and contemporaneous English use
The authors P. G. Wodehouse and Arthur Conan Doyle were popular among public school boys in England before the Great War. Both used the phrase "animal spirits" in their writings.
John Coates of Cambridge University describes the Edwardian public school environment as one where dynamism and leadership coexist with less constructive traits such as recklessness, heedlessness, and in-caution. Coates attributes this to fluctuations in hormonal balances; abnormally high levels of testosterone may create individual success but also collective excessive aggression, overconfidence, and herd behavior, while too much cortisol can promote irrational pessimism and risk aversion. The author's remedy for this is to shift the employment balance in finance towards women and older men and monitor traders' biology.
Contemporary research The term "animal spirits" was used in the works of a psychologist that Keynes had studied in 1905 and also suggests that Keynes implicitly drew upon an evolutionary understanding of human instinct.
In 2009, economists George Akerlof and Robert J. Shiller advised in addition that:
Shiller further contends that "animal spirits" refers also to the sense of trust humans have in one another, including a sense of fairness in economic dealings.
See also Behavioral economics Decision making Drive theory
Notes
Further reading Akerlof, George A., and Robert J. Shiller. Animal spirits: How human psychology drives the economy, and why it matters for global capitalism (Princeton University Press, 2010) online. Dow, Alexander, and Sheila C. Dow. "Animal spirits revisited." Capitalism and Society 6.2 (2011). online Francois, Patrick, and Huw Lloyd-Ellis. "Animal spirits through creative destruction." American Economic Review 93.3 (2003): 530–550. online Howitt, Peter, and R. Preston McAfee. "Animal spirits." American Economic Review (1992): 493–507. online Lear, Jackson. Animal Spirits: The American Pursuit of Vitality from Camp Meeting to Wall Street (2023) excerpt
External links
"Animal spirits" from The Economist economic terms "A special report on the future of finance: Wild-animal spirits", The Economist, 22 January 2009 "Animal Spirits Depend on Trust: The proposed stimulus isn't big enough to restore confidence" by Robert J. Shiller, The Wall Street Journal, 27 January 2009 Loewenstein, George and Ted O'Donoghue. "Animal Spirits: Affective and Deliberative Processes in Economic Behavior", Cornell University Working Paper 04–14, August 2004 In 2013, NPR's Planet Money produced a video series and web site following the making of a tee shirt that they designed, featuring a visual pun on Keynes' animal spirits.