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Animal spirits can undermine a rational approach to money and investing. Learn who coined the term and how it goes against traditional views of economics.
Animal spirits is a term used by economist John Maynard Keynes to explain irrational behaviour by investors. Traditional economics views people as rational beings who act logically based on facts. In real life, however, investors often act on emotions, rumours or gut instinct. Keynes attributes this behaviour to people having “animal spirits.”
Example: “In their 2010 book, Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism, Nobel laureates George Akerlof and Robert Shiller explain how human emotion drives volatility in stock markets and the economy.”
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