Friday, January 30, 2009

Animal Spirits and Action

Good evening, campers! Gather 'round the fire and let's talk about "animal spirits."

Tommy! Stop poking Anna with that stick!

Loooooonnnngggg ago...well...not, really all that long ago...it was early twentieth century, there was a man named John Maynard Keynes (pronounced "cains"). He was a British economist.

What's that Shanana? An economist? Well, an economist is someone who doesn't actually work for a living. They use numbers to scare the poop out of people and they have really messy offices.

Yes, Tina, I know "poop" sounds funny. But, let's continue our story.

Mr. Keynes had a major impact on modern economic and political theory as well as on many governments' fiscal policies.

Yes, Trevor, I know your daddy says "physical" instead of "fiscal" but your daddy also says "relator" instead of "realtor." Why? Well, your daddy's a Clemson fan, Trevor, what can I tell ya.

LET'S MOVE ON.

Keynes advocated having the government intervene in the marketplace using fiscal and monetary measures, like screwing around with...

Yes, Tina, I know I used the word "screwing," I'm sorry. I meant to say "messing."

COULD YOU PLEASE LET ME FINISH THE STORY!

The government might mess around with the interest rate to help even out the bad effects of things like recessions, depressions, and booms. Mr. Keynes is considered among the most influential economists of the 20th century.

Yes, David, I know you're getting sleepy so I'll get to the point.

Mr. Keynes said that a lot of the motivation for making decisions came from what he called "animal spirits." In his book, The General Theory of Employment Interest and Money, he said:

"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."

"... human decisions affecting the future, whether personal or political or economic, cannot depend on strict mathematical expectation, since the basis for making such calculations does not exist ... it is our innate urge to activity that makes the wheel go around ..."

Yes, Sheldon? Well, I'll tell you what it means. And don't say, "What the hell does that crap mean?!" It's rude and...

Yes, Tina, I know Sheldon said, "Crap."

It means that a lot of times we make decisions on a deep feeling, animal spirits, of whether or not something will come out positive for us. If we believe it will, we go ahead. If we don't believe it will turn out good, we don't. And as much as we would like to use business decision-making tools...logic, to make a decision, it's almost impossible to move if we don't have the faith that the end result will be in our favor.

Ok, story time is over. Everyone back to their tents.

No, Sheldon, you can't sleep in Tina's tent.

Yes, Tina, I heard Sheldon say, "Crap."

Goodnight, kids.

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