Volume 7 (2012)
Most Downloaded Articles
- Excessive Ambitions by Elster, Jon
- Comment on "Implementing a Macroprudential Framework: Blending Boldness and Realism" (by Claudio Borio) by Calomiris, Charles W
- Animal Spirits Revisited by Dow, Alexander and Dow, Sheila C.
- Comment on "The Complex Economic Organization of Capitalist Economies" (by Richard R. Nelson) by Hollingsworth, Rogers
- Capital Markets and Financial Politics: Preferences and Institutions by Roe, Mark J.
Animal Spirits Revisited
1Glasgow Caledonian University
1University of Stirling
Citation Information: Capitalism and Society. Volume 6, Issue 2, Pages –, 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.