Animal Spirits
Animal spirits is Keynes’s name for the non-model confidence that makes people invest or refuse to — the residual when rates and cash flows are not enough to explain the tape.
Definition
In the General Theory, investment is not a cold NPV calculator; waves of optimism and fear move capex and markets. Desk use is looser: ‘animal spirits are back’ means high-beta and issuance work again.
Why it matters
It is honest about residual variance. It is also a trash can for views you cannot specify. Use it as a residual, not as a factor you can size.
Case
Late-1990s capex and 2021 issuance calendars were spirits-on. 2008 Q4 and March 2020 were spirits-off — policy had to replace them.
How to read it
If you can replace the phrase with a measurable (credit impulse, real rates, vol), do that. Keep ‘spirits’ for what is left.
Key papers
Landmark references with real publisher or arXiv links — not token-overlap noise.
- The General Theory of Employment, Interest and MoneyKeynes · 1936 · MacmillanChapter 12 — animal spirits.