Thursday, November 11, 2010

Whose Animal Spirits?

Following the commentaries and observations in various major financial media, it's often difficult to tell whose references to Keynes's "animal spirits" theory are done seriously and whose are done tongue-in-cheek. Seeing as how Keynesianism is firmly entrenched as an economic philosophy amongst most investment professionals, however, I have to assume that for the most part the references are made in earnest.

That got me wondering: when an economic commentator refers to the dearth of animal spirits as an originating cause of a dramatic decline in aggregate demand, whose specific animal spirits do they have in mind? In other words, in this Scapegoat Economic view, who is being blamed for not doing their patriotic duty in demanding enough final goods like everybody else?

It would seem reasonable to believe that the commentator does not have himself in mind. It's probably also likely that he is not secretly harboring a grudge against any of his friends or family for suddenly losing their animal spirits and neglecting to demand enough goods and services from others. Personally speaking, at the onset of this most recent recession I don't recall demanding fewer goods and services from those around me and I don't know anyone personally who came clean in a moment of immense self-doubt and sense of unbridled guilt to admit that they just couldn't bring themselves to demand enough from others at the beginning of the recession, thereby making their own small contribution to the mess we find ourselves in today.

It's actually a tiny bit humorous-- the much vilified, often castigated consumer of the current recession was well-known as a hero before hand, demanding every year more houses, more cars, more food, more energy, more Apple products and gadgets... more, more, more!

And so I am left wondering, "whose animal spirits" have up and gone away and left us with this economic mess? Will the real economically-depressed individuals please stand up?


  1. I've bought a lot more wine and whiskey since the onset of the depression. I did have to cancel my membership to Move On and the ACLU, though (NOT!)

  2. okay, I'll come clean. i have not been spending as much because i have been saving up to buy shares in the GM IPO.

  3. Stanley,

    Now we at least know why we remain mired in the current recession. The mystery that lingers is who stopped spending before the recession?