Volume 7 (2012)
Most Downloaded Articles
- Implementing a Macroprudential Framework: Blending Boldness and Realism by Borio, Claudio
- Capital Markets and Financial Politics: Preferences and Institutions by Roe, Mark J.
- The Historical Origins of 'Open Science': An Essay on Patronage, Reputation and Common Agency Contracting in the Scientific Revolution by David, Paul A.
- Household Debt in the Consumer Age: Source of Growth--Risk of Collapse by Cynamon, Barry Z. and Fazzari, Steven M.
- The New Economy Business Model and the Crisis of U.S. Capitalism by Lazonick, William
Animal Spirits Revisited
1Glasgow Caledonian University
2University of Stirling
Citation Information: Capitalism and Society. Volume 6, Issue 2, ISSN (Online) 1932-0213, DOI: 10.2202/1932-0213.1087, December 2011
- Published Online:
The term animal spirits has returned to academic and public discourse in a way which departs significantly from the original use of the term by Keynes. The new behavioural economics literature uses the term to refer to a range of behaviour which falls outside what is normally understood as rational. This treatment follows from the mainstream dichotomisation between rationality and irrationality. However, Keynes explained that, given fundamental uncertainty, rationality alone was insufficient to justify action. Animal spirits was the name he gave to the (psychological) urge to action which explained decisions being taken in spite of uncertainty; animal spirits for him were neither rational nor irrational. Nor are they beyond analysis. We explore how the nature and role of animal spirits can vary according to context (as between different sectors, types of firm and within firms). This analysis indicates ways in which policy can promote structural change to strengthen animal spirits in the long term as well as offset short-term weakening in animal spirits.