Animal Spirits

Keynes

Animal spirits‘ is the term economist John Maynard Keynes used in his 1936 book ‘The General Theory of Employment, Interest and Money’ to describe emotions which influence human behavior and can be measured in terms of consumer confidence. It has since been argued that trust is also included or produced by ‘animal spirits.’ Several articles and at least two books with a focus on “animal spirits” were published in 2008 and 2009 as a part of the Keynesian resurgence.

According to Keynes: ‘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.’

Conservative columnist and linguist William Safire published an article ‘On Language: ‘Animal Spirits” in the ‘New York Times’ in 2009, stating: ‘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 naturall. 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.”

It has also been suggested that Keynes may be referring to David Hume’s term for spontaneous motivation although it is not mentioned in the ‘Treatise of Human Nature.’ The term itself is drawn from the Latin ‘spiritus animales’ which may be interpreted as the spirit (or fluid) that drives human thought, feeling, and action.

‘Animal spirits’ was also 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 WWI. 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.’

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 advice, opinion, or exhortation to the point of stretching the letter of any regulations involved to the limit. The aim was to maximize short-term disruption of what was considered to be ‘normal’ behavior  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.’

”Then what did you MEAN by putting it there?’ roared Mr. Downing. / ‘Animal spirits, sir,’ said Psmith. / ‘WHAT!’ / ‘Animal spirits, sir.” Wodehouse uses antithesis in this 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.

Dr. 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 incaution. 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 (a stress hormone  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. In 2009 Akerloff and 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.’

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