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. [1]
The original passage by Keynes reads:
Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than on a mathematical expectation, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as a result of animal spirits – of a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities. [2]
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.[ citation needed ]
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. [3]
William Safire explored the origins of the phrase in his 2009 article "On Language: 'Animal Spirits'":
The phrase that Keynes made famous in economics has a long history. "Physitions teache that there ben thre kindes of spirites", wrote Bartholomew Traheron in his 1543 translation of a text on surgery, "animal, vital, and natural. The animal spirite hath his seate in the brayne ... called animal, bycause it is the first instrument of the soule, which the Latins call animam." William Wood in 1719 was the first to apply it in economics: "The Increase of our Foreign Trade...whence has arisen all those Animal Spirits, those Springs of Riches which has enabled us to spend so many millions for the preservation of our Liberties." Hear, hear. Novelists seized its upbeat sense with enthusiasm. Daniel Defoe, in "Robinson Crusoe": "That the surprise may not drive the Animal Spirits from the Heart." Jane Austen used it to mean "ebullience" in "Pride and Prejudice": "She had high animal spirits." Benjamin Disraeli, a novelist in 1844, used it in that sense: "He...had great animal spirits, and a keen sense of enjoyment." [4]
Thomas Hobbes used the phrase "animal spirits" to refer to passive emotions and instincts, as well as natural functions like breathing. [5]
Ralph Waldo Emerson in Society and Solitude (1870) wrote of "animal spirits" as prompting people to action, in a broader sense than Keynes's:
A cold, sluggish blood thinks it has not facts enough to the purpose, and must decline its turn in the conversation. But they who speak have no more,—have less. 'T is not new facts that avail, but the heat to dissolve everybody's facts. Heat puts you in right relation with magazines of facts. The capital defect of cold, arid natures is the want of animal spirits. They seem a power incredible, as if God should raise the dead. [6]
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 [7] or depress by adopting assembly-line work whereby the worker repeats a single task. [8]
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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.
Though a hard reader, he was no bookworm, but an active, powerful young fellow, full of animal spirits and vivacity, and extremely popular among his fellow-students.
— Doyle: The Silver Hatchet [9]
There was, as a matter of fact, nothing much wrong with Stone and Robinson. They were just ordinary raggers of the type found at every public school, small and large. They were absolutely free from brain. They had a certain amount of muscle, and a vast store of animal spirits. They looked on school life purely as a vehicle for ragging.
— P.G. Wodehouse, Mike, Chapter 10
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. [10] 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.
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.[ clarification needed ] [11]
In 2009, economists George Akerlof and Robert J. Shiller advised in addition that:
The proper role of the government, like the proper role of the advice-book parent, is to set the stage. The stage should give full rein to the creativity of capitalism. But it should also countervail the excesses that occur because of our animal spirits.
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. [13]
Bellum omnium contra omnes, a Latin phrase meaning "the war of all against all", is the description that Thomas Hobbes gives to human existence in the state-of-nature thought experiment that he conducts in De Cive (1642) and Leviathan (1651). The common modern English usage is a war of "each against all" where war is rare and terms such as "competition" or "struggle" are more common.
George Arthur Akerlof is an American economist and a university professor at the McCourt School of Public Policy at Georgetown University and Koshland Professor of Economics Emeritus at the University of California, Berkeley. Akerlof was awarded the 2001 Nobel Memorial Prize in Economic Sciences, jointly with Michael Spence and Joseph Stiglitz, "for their analyses of markets with asymmetric information." He is the husband of United States Secretary of the Treasury Janet Yellen.
In Marxist philosophy, the term commodity fetishism describes the economic relationships of production and exchange as being social relationships that exist among things and not as relationships that exist among people. As a form of reification, commodity fetishism presents economic value as inherent to the commodities, and not as arising from the workforce, from the human relations that produced the commodity, the goods and the services.
In classical economics, Say's law, or the law of markets, is the claim that the production of a product creates demand for another product by providing something of value which can be exchanged for that other product. So, production is the source of demand. In his principal work, A Treatise on Political Economy, Jean-Baptiste Say wrote: "A product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value." And also, "As each of us can only purchase the productions of others with his/her own productions – as the value we can buy is equal to the value we can produce, the more men can produce, the more they will purchase."
The Open Society and Its Enemies is a work on political philosophy by the philosopher Karl Popper, in which the author presents a "defence of the open society against its enemies", and offers a critique of theories of teleological historicism, according to which history unfolds inexorably according to universal laws. Popper indicts Plato, Hegel, and Marx for relying on historicism to underpin their political philosophies.
Institutional economics focuses on understanding the role of the evolutionary process and the role of institutions in shaping economic behavior. Its original focus lay in Thorstein Veblen's instinct-oriented dichotomy between technology on the one side and the "ceremonial" sphere of society on the other. Its name and core elements trace back to a 1919 American Economic Review article by Walton H. Hamilton. Institutional economics emphasizes a broader study of institutions and views markets as a result of the complex interaction of these various institutions. The earlier tradition continues today as a leading heterodox approach to economics.
Herd mentality is the tendency for people’s behavior or beliefs to conform to those of the group they belong to. The concept of herd mentality has been studied and analyzed from different perspectives, including biology, psychology and sociology. This psychological phenomenon can have profound impacts on human behavior.
Criticism of capitalism is a critique of political economy that involves the rejection of, or dissatisfaction with the economic system of capitalism and its outcomes. Criticisms typically range from expressing disagreement with particular aspects or outcomes of capitalism to rejecting the principles of the capitalist system in its entirety.
Some Marxists posit what they deem to be Karl Marx's theory of human nature, which they accord an important place in his critique of capitalism, his conception of communism, and his materialist conception of history. Marx does not refer to human nature as such, but to Gattungswesen, which is generally translated as "species-being" or "species-essence". According to a note from Marx in the Manuscripts of 1844, the term is derived from Ludwig Feuerbach's philosophy, in which it refers both to the nature of each human and of humanity as a whole.
Criticism of Marxism has come from various political ideologies, campaigns and academic disciplines. This includes general intellectual criticism about dogmatism, a lack of internal consistency, criticism related to materialism, arguments that Marxism is a type of historical determinism or that it necessitates a suppression of individual rights, issues with the implementation of communism and economic issues such as the distortion or absence of price signals and reduced incentives. In addition, empirical and epistemological problems are frequently identified.
Crawford Brough Macpherson was an influential Canadian political scientist who taught political theory at the University of Toronto.
Robert James Shiller is an American economist, academic, and author. As of 2022, he served as a Sterling Professor of Economics at Yale University and is a fellow at the Yale School of Management's International Center for Finance. Shiller has been a research associate of the National Bureau of Economic Research (NBER) since 1980, was vice president of the American Economic Association in 2005, its president-elect for 2016, and president of the Eastern Economic Association for 2006–2007. He is also the co‑founder and chief economist of the investment management firm MacroMarkets LLC.
The getAbstract International Book Award is a bilingual award for nonfiction business-focused books.
Veneer theory is a term coined by Dutch primatologist Frans de Waal to label the Hobbesian view of human morality that he criticizes throughout his work. Although he criticizes this view in earlier works, the term in this form is introduced in his 2005 book Our Inner Ape, denoting a concept that he rejects, namely that human morality is "a cultural overlay, a thin veneer hiding an otherwise selfish and brutish nature". The idea of the veneer theory goes back to Thomas Henry Huxley and has more recently been advocated by biologists like George C. Williams.
Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism (2009) is a book by economists George Akerlof and Robert Shiller written to promote the understanding of the role played by emotions in influencing economic decision making. According to the authors, economists have tended to de-emphasize the importance of emotional factors, as the effects of emotions are difficult to model and quantify. The book asserts that a variety of otherwise puzzling questions can be answered once one allows for the effect that emotional drives, or "animal spirits," have on economic factors.
Throughout modern history, a variety of perspectives on capitalism have evolved based on different schools of thought.
Fear the Boom and Bust is a 2010 hip hop music video in which 20th century economists John Maynard Keynes and Friedrich von Hayek take part in a rap battle discussing economics, specifically, the boom and bust business cycle, for which the video is named. The video has more than seven million views on YouTube.
The history of evolutionary psychology began with Charles Darwin, who said that humans have social instincts that evolved by natural selection. Darwin's work inspired later psychologists such as William James and Sigmund Freud but for most of the 20th century psychologists focused more on behaviorism and proximate explanations for human behavior. E. O. Wilson's landmark 1975 book, Sociobiology, synthesized recent theoretical advances in evolutionary theory to explain social behavior in animals, including humans. Jerome Barkow, Leda Cosmides and John Tooby popularized the term "evolutionary psychology" in their 1992 book The Adapted Mind: Evolutionary Psychology and The Generation of Culture. Like sociobiology before it, evolutionary psychology has been embroiled in controversy, but evolutionary psychologists see their field as gaining increased acceptance overall.
Historical materialism is Karl Marx's theory of history. Marx located historical change in the rise of class societies and the way humans labor together to make their livelihoods.
Marxism and Keynesianism is a method of understanding and comparing the works of influential economists John Maynard Keynes and Karl Marx. Both men's works has fostered respective schools of economic thought that have had significant influence in various academic circles as well as in influencing government policy of various states. Keynes' work found popularity in developed liberal economies following the Great Depression and World War II, most notably Franklin D. Roosevelt's New Deal in the United States in which strong industrial production was backed by strong unions and government support. Marx's work led the way to a number of socialist states, notably the Soviet Union and the People's Republic of China. The immense influence of both Marxian and Keynesian schools has led to numerous comparisons of the work of both economists along with synthesis of both schools.