Animal spirits

economic-dictionary

Animal spirits (in Spanish, animal spirits) is a term coined by the famous British economist John Maynard Keynes. This is about the relationship between human behavior, as well as the emotional component of this, and the economy.

The concept of animal spirits was coined by Keynes, initially, in his main work "General Theory of Occupation, Interest and Money." Work published by the economist in 1936, in which he mentioned the existence of an irrational factor, known as animal spirit. An action in which the individual acted imprecisely, emotionally and intuitively, influencing the evolution of the economy. In short, the existence of a psychological factor in the human being that, through actions with a high emotional component, causes variations in the economy.

John Maynard Keynes defined it as a market instability, unable to measure it with mathematical expectations. Since this was produced by a spontaneous behavior of individuals that can cause variations in the behavior of the economy. These actions were driven by an emotional factor (primary drives). On the other hand, typical of human nature, which is not rational, and which prevents quantitative measurement with mathematical tools, since its rational calculation is not possible. That is why indices are used to reflect an approximation.

Origin of the concept of animal spirits

Although not confirmed, it is believed that John Maynard Keynes was inspired by Scottish philosopher, historian and economist David Hume to coin the term. Hume, along with other thinkers of his time such as Adam Smith, studied in depth the motives that drove human actions. His thoughts gave rise to works that could instill in Keynes the approach to the concept, such as the "Treatise on human nature" or "Research on human understanding." Works that were published by Hume in the years 1739 and 1748, respectively.

Although the influence on Keynes is attributed to Hume, much earlier, various studies have included the treatment of terms similar to animal spirits. Referring to such an event, by another series of authors, even before Hume. Some essays collect the existence of the term in works by René Descartes, as well as other renowned authors such as Locke. However, they all refer to the same concept, although, since Hume, the term has been closely linked to economics.

Animal spirits in the 21st century

In recent years, a number of economists, including a large number of Nobel laureates, have studied, leading to works, the Keynesian theory of animal spirits. Among these we could highlight Professor Daniel Kahneman, Professor Robert J. Shiller or Professor George Akerlof; all of them Nobel Prize winners in Economics, as well as followers and researchers on the subject.

In addition, other great economists, including the Nobel laureate and professor Richard Thaler, have also dedicated major works to the study of human behavior and its influence on the economy. Research that has led to an increasingly broad branch of study, generating a new branch of knowledge and study of economics known as "behavioral economics" or "behavioral economics" in English.

This new branch of knowledge is attributed to the knowledge extracted from the works of Adam Smith and Jeremy Bentham mainly, both economists of the neoclassical period. That is why in the study of behavioral economics, the use of psychology in line with neoclassical economics prevails. A study that focuses mainly on rationality and irrationality, analyzing their effects on consumption and giving rise to terms such as discounted utility and expected utility.

Criticisms of animal spirits

Given the inability to accurately measure the influence of animal spirits on economics, many authors of the orthodox school might not agree with Keynesian theory. In fact, both Shiller and Akerlof try to provoke the debate in their book "Animal Spirits", where the financial crisis of 2008 could be originated, precisely, by these animal spirits. This has once again sowed doubt in the permanent war of the orthodox school against the heterodox. A war in which the first only considers economic science as an exact science, which rationalizes the behavior of people.

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