Over the last week I bumped into two different articles which mentioned “Animal Spirits”, an idea which seemed to explain why my good friends Mark Scott and David Gerstel were at such opposite ends of the spectrum in regard to how we, as people, will respond as soon as we feel this current economic threat has passed. Mark Scott asked me this week how I saw the next year in the remodeling industry, the next 5. I couldn’t answer – conditions still seem in such a state of flux (worldwide) as to render strong conclusions difficult.
However when I speculated that we (boomers) and our children would learn as much from this experience as our parents learned from the Great Depression, Mark laughed. He thinks we’ll go back to our often excessive spending as soon as the credit markets thaw. David Gerstel said in an e-mail this week (edited for cohesion of thought and included with permission): “As Ben Stein said we are more than we invest in. Though in a certain sense we are not. Wealth matters and it matters hugely, I think. At a minimum level it protects one from the fear of wanting for necessities — shelter, food, clothing, warmth, medical care. And beyond that it can become, at a certain level, a vehicle which allows one to cruise about life much more freely, much more creatively. I might even be willing to consider that well-tended wealth is the most substantial and least ephemeral of our conditions and accomplishments. Certainly reputation, skill, health can all go out the window in a flash. We might be, as Ben opines, much more than our gathered assets, but surely they are a big part of who we are, what our possibilities are, too. There’s an old saying, the “rich are different,” right? And it has endured. Which suggests a certain substance to the saying.” Which seems to suggest that David imagines that we will have learned significantly from this downturn and not only vow but also practice well-considered thrift in the future. Which leads me back to “animal spirits”: the concept explains human nature’s seeming inability to remember the bad times as soon as they’ve passed. Because we’re still in (at the brink of, at the top of the slope, on the way down – anywhere but at the bottom coming up) bad times our confidence has not yet returned. But when it does, both articles say, we’ll quickly put aside what we thought we so painfully learned here and embrace with optimism the future. The Economist defines animal spirits as: “The colorful name that Keynes gave to one of the essential ingredients of economic prosperity: confidence. According to Keynes, animal spirits are a particular sort of confidence, “naive optimism”. He meant this in the sense that, for entrepreneurs in particular, “the thought of ultimate loss which often overtakes pioneers, as experience undoubtedly tells us and them, is put aside as a healthy man puts aside the expectation of death”. Where these animal spirits come from is something of a mystery. Certainly, attempts by politicians and others to talk up confidence by making optimistic noises about economic prospects have rarely done much good.” Here are the two articles, on from PBS and the other from The New Yorker.
http://www.pbs.org/newshour/businessdesk/2009/01/in-case-you-missed-it-economis.html http://www.newyorker.com/talk/comment/2009/01/05/090105taco_talk_gopnik http://www.pbs.org/newhouse/businessdesk/2009/09/in-case-you-missed-it-economis.html http://www.newyorker.com/talk/comment/2009/01/05/090105taco_talk_gopnick