Animal spirits come from the Latin spiritus animalis: “breath that awakens the human mind.” It was introduced by the British economist John Maynard Keynes in 1936. Animal spirits refer to how human emotions can influence financial decision making in times of uncertainty and instability. Animal spirits mainly explain the psychology of the market and, in particular, the role of emotions and herd mentality in investing. Animal spirits help explain why people behave irrationally and are precursors to modern behavioral economics. We can see the concept of vitality in action during financial crises, including the Great Recession of 2007-2009. Anchoring and Adjustment
September 25, 2022 Anchor and Adjust is a cognitive heuristic where a person starts from an initial idea and adjusts their beliefs based on that starting point. Bandwagon Effect
September 25, 2022 The bandwagon effect is when people start doing something because it seems like everyone else is doing it. Barriers to Entry
September 25, 2022 Barriers to entry describe high start-up costs or other barriers that prevent new competitors from easily entering an industry or area of business. Black Monday
September 25, 2022 Black Monday refers to the stock market crash that occurred on October 19, 1987, when the Dow Jones Industrial Average lost almost 22% in one day, causing the global stock market to crash. Conflict Theory
September 25, 2022 Conflict theory focuses on competition between groups within society for limited resources. Discouraged Worker
September 25, 2022 Desperate workers are workers who have stopped looking for work because they did not find suitable employment options or were not shortlisted when applying for a job.
The causes of employee frustration are complex and varied. Economic Shock
September 25, 2022 Economic shocks are random, unpredictable events that have a wide impact on the economy and are caused by things that go beyond economic models. Economist
September 25, 2022 An economist is an expert who studies the relationship between a society’s resources and its production or output, using a number of different indicators to predict future trends. Endowment Effect
September 25, 2022 The possession effect describes the circumstances under which a person attaches a higher value to an object they already own than the value they would give to that same object if they did not own it. Fear and Greed Index
September 25, 2022 The Fear and Greed Index was developed by CNNMoney to measure the two main emotions that affect investors. Gambler's Fallacy
September 25, 2022 Player fallacy refers to the mistaken thinking that a certain event is more or less likely given the previous series of events. Game Theory
September 25, 2022 Game theory is a theoretical framework for understanding social situations between competing players and ensuring optimal decision making by independent and competitive actors in a strategic setting. Gamification
September 25, 2022 Gamification is the use of game elements in non-game activities. Geographical Labor Mobility
September 25, 2022 Geographic labor mobility refers to the ability of workers within a particular economy to move to find a new or better job. Headline Effect
September 25, 2022 The headline effect refers to the observation that negative news tends to have a proportionately greater impact on prices and markets than positive news. Home Market Effect
September 25, 2022 The domestic market effect suggests that goods that have large economies of scale and high transport costs will tend to be produced and exported by countries with large domestic demand. Homo Economicus
September 25, 2022 Homo economicus is a theoretical abstraction that some economists use to describe a rational human being. Homogeneous Expectations
September 25, 2022 Homogeneous expectations within modern portfolio theory assume that all investors expect the same thing and make the same choice in a given situation. Human Development Index (HDI)
September 25, 2022 The Human Development Index (HDI) is a measurement system used by the United Nations to assess the level of individual human development in each country. Intertemporal Choice
September 25, 2022 Intertemporal choice refers to decisions such as spending habits made in the short term that may affect future financial opportunities. Investment Multiplier
September 25, 2022 The investment multiplier refers to the incentive effect of public or private investment. January Barometer
September 25, 2022 The January barometer is a market theory that says that returns in January predict returns for the rest of the year.
– It is popular with some traders and was first described in The Stock Trader’s Almanac in 1967. Japan Inc.
September 25, 2022 Japan Inc. describes Japan’s transition to a corporate capitalist culture from the 1970s and 1980s to the 1990s. Karl Marx
September 25, 2022 Karl Marx was an outstanding thinker who wrote on topics related to economics, political economy and society. Laissez-Faire
September 25, 2022 Laissez-faire is an economic philosophy of free market capitalism that opposes government intervention.