Animal spirits (Keynes)
Animal spirits is the term John Maynard Keynes used in his 1936 book The General Theory of Employment, Interest and Money to describe the instincts, proclivities and emotions that ostensibly influence and guide human behavior, and which can be measured in terms of, for example, consumer confidence. It has since been argued that trust is also included in or produced by "animal spirits".
Use by Keynes
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 mathematical expectations, 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 the result of animal spirits—a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities.
Philosophy and Social Science
William Safire explored 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."
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 impel by encouraging social interaction and competition within her factory or depress by adopting assembly-line work whereby the worker repeats a single task.
Earlier and Contemporaneous English Use
"Animal spirits" was a euphemistic late-Victorian and Edwardian phrase used by English public schoolboys such as P. G. Wodehouse (born two years before the Etonian Keynes) who attended Dulwich College. Wodehouse and Arthur Conan Doyle were popular authors for public school boys in England before the Great War. Doyle himself used the phrase "animal spirits" in 1883, the year of Keynes's birth.
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
Two examples of Wodehouse's use of the phrase are in the 1909 book Mike (later republished in two parts as Mike at Wrykyn and Mike and Psmith). "Animal spirits" denoted an adolescent attitude to authority that resulted in energetically and deliberately acting on cadvice, opinion, or exhortation to the point of stretching the letter of any regulations involved to the limit. The aim was to maximise short-term disruption of what was considered to be 'normal' behaviour. Restoring equilibrium subsequently required a firm sanction from those in authority and possibly also a re-casting of the regulation to prevent repeats of the actions undertaken. The slang term of the era for this was 'ragging'.
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.— Mike, Chapter XXXIX.
"Then what did you MEAN by putting it there?" roared Mr. Downing.
"Animal spirits, sir," said Psmith."Animal spirits, sir."
"WHAT!"— Mike, Chapter LI.
Wodehouse uses antithesis in the latter example to make comedy out of Mr. Downing's astonishment; surely nobody could be less susceptible to "animal spirits" than the suave, debonaire Psmith? Psmith In The City (1910) was based on Wodehouse's own experiences in the 'square mile' and the theme is implicitly elaborated on in the financial environment of the New Asiatic Bank.
John Coates of Cambridge University supports the popular English Edwardian public school intuition that qualities such as 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 behaviour, 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.
Araña et al. (2016) show that some behavior (in their case: tourist choices) can be better understood as the consequence of an "animal spirit" rather than "fully cognitive" decision making process. They design a field experiment to test in practice some "non-market sustainability policies", based on affecting the emotional reaction to tourist choices can be more efficient and less costly than conventional "market-based sustainability policies" like environmental taxes.
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.— Animal Spirits, page 9
- Keynes, John M. (1936). The General Theory of Employment, Interest and Money. London. Macmillan. pp. 161-162.
- "Animal Spirits", by William Safire, The New York Times, 10 March 2009
- Hobbes, Thomas. Leviathan. pp. Chapter 34.
- Marx, Karl. "Chapter 13: Cooperation". Capital, Volume 1.
- Marx, Karl. "Chapter 14: Division of Labour and Manufacture". Capital, Volume 1.
- Coates, John (14 June 2012). The hour between dog and wolf: risk-taking, gut feelings and the biology of boom and bust (1st American ed.). New York: Penguin Press. ISBN 978-1594203381.
- Barnett, Vincent (2015-06-01). "Keynes and the Psychology of Economic Behavior: From Stout and Sully to The General Theory". History of Political Economy. 47 (2): 307–333. doi:10.1215/00182702-2884345. ISSN 0018-2702.
- Akerlof, George A.; Shiller, Robert J. (2009). Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism. Princeton, NJ: Princeton University Press. ISBN 978-0691142333.
- "Animal spirits" from The Economist's 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
- Araña, J. E., & León, C. J. (2016). Are tourists animal spirits? Evidence from a field experiment exploring the use of non-market based interventions advocating sustainable tourism. Journal of Sustainable Tourism, 1-16; doi:10.1080/09669582.2015.1101128. .
- 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.