Record Details

A first formal approach to animal spirits beyond uncertainty

European Journal of Government and Economics

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Field Value
 
Title A first formal approach to animal spirits beyond uncertainty
 
Creator Soldatos, Gerasimos T.
Varelas, Erotokritos
 
Subject Animal spirits, Emotions, Socioeconomic status, Individual vs. social perception of private welfare, Business cycles
D63, E32, E43, H11, Z13
 
Description Standard Macroeconomics treats animal spirits as a source of uncertainty disturbing otherwise rational expectations. But, Keynesian animal spirits ensue from suboptimal emotional responses to socioeconomic status change beyond matters of uncertainty. This paper identifies such spirits with the disturbance from the optimal decision-making implied by an emotional well-being utility function. The introduction of a policy-maker, holding its own view of private welfare in a society of emotional individuals, generates by itself, i.e. in the absence of animal spirits, uniform business fluctuations. This is the result of the income redistribution needed to reconcile the policy-maker’s with the emotional individual’s view of private welfare. Consequently, if animal-spirits induced fluctuations are already present when a policy-maker is introduced in the economy, the aim of policy intervention should be the design of that income redistribution that would not aggravate the business cycle but that would end up in uniform only cycles, with the aid perhaps of discretionary interest rate policy. Nevertheless, if animal spirits do not exist when the policy-maker enters the system, the income-redistribution induced cycles may incite such spirits by themselves in which case the cycles will not be of the uniform type. All comes down to “income and emotion”, to an ageless and ecumenical fact of life, complicated purposefully or not by authority.
 
Publisher Europa Grande
 
Contributor —
 
Date 2015-12-30
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://www.ejge.org/index.php/ejge/article/view/80
 
Source European Journal of Government and Economics; Vol 4, No 2 (2015); 104-117
2254-7088
 
Language eng
 
Relation http://www.ejge.org/index.php/ejge/article/view/80/56
 
Rights Copyright (c) 2015 Gerasimos T. Soldatos, Erotokritos Varelas
http://creativecommons.org/licenses/by/4.0