Animal Spirits: Affective and Deliberative Processes in Economic Behavior

54 Pages Posted: 4 May 2004  

George Loewenstein

Carnegie Mellon University - Department of Social and Decision Sciences

Ted O'Donoghue

Cornell University - Department of Economics

Date Written: May 4, 2004

Abstract

The economic conception of human behavior assumes that a person has a single set of well-defined goals, and that the person's behavior is chosen to best achieve those goals. We develop a model in which a person's behavior is the outcome of an interaction between two systems: a deliberative system that assesses options with a broad, goal-based perspective, and an affective system that encompasses emotions and motivational drives. Our model provides a framework for understanding many departures from full rationality discussed in the behavioral-economics literature, and captures the familiar feeling of being "of two minds." By focusing on factors that moderate the relative influence of the two systems, our model generates a variety of novel testable predictions.

Suggested Citation

Loewenstein, George and O'Donoghue, Ted, Animal Spirits: Affective and Deliberative Processes in Economic Behavior (May 4, 2004). Available at SSRN: https://ssrn.com/abstract=539843 or http://dx.doi.org/10.2139/ssrn.539843

George F. Loewenstein (Contact Author)

Carnegie Mellon University - Department of Social and Decision Sciences ( email )

Pittsburgh, PA 15213-3890
United States
412-268-8787 (Phone)
412-268-6938 (Fax)

Ted O'Donoghue

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States
607-255-6287 (Phone)
607-255-2818 (Fax)

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