Animal Spirits Revisited

25 Pages Posted: 28 Jan 2013

See all articles by Alistair Dow

Alistair Dow

Glasgow Caledonian University

Sheila C. Dow

University of Stirling - Department of Economics; University of Victoria - Faculty of Business

Date Written: January 28, 2013


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.

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Keywords: animal spirits, rationality, Keynes

Suggested Citation

Dow, Alexander and Dow, Sheila C., Animal Spirits Revisited (January 28, 2013). Capitalism and Society, Vol. 6, Issue 2, Article 1, 2011, Available at SSRN:

Alexander Dow (Contact Author)

Glasgow Caledonian University ( email )

City Campus
Cowcaddens Road
Glasgow G4 0BA, Scotland
United Kingdom

Sheila C. Dow

University of Stirling - Department of Economics ( email )

Stirling, Scotland FK9 4LA
United Kingdom

University of Victoria - Faculty of Business ( email )

Victoria, British Columbia

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