• This is a term that refers to the emotions and instincts that guide the behaviour of investors and consumers in a market economy.
• It was coined by British economist John Maynard Keynes in his 1936 book The General Theory of Employment, Interest, and Money, to explain the persistence of economic fluctuations under capitalism.
• Keynes argued that investment and consumption are often based on how people feel about the overall economy rather than on unbiased, rational analysis of facts.
• Critics have argued that while people are not perfectly rational, they are not completely guided by emotions either; hence, animal spirits cannot sufficiently explain economic cycles.

Source:TH