International Social Science Journal (Chinese Edition)

No.1, 2026

The Role of “Animal Spirits” in the “Keynesian Revolution”

(Abstract)

Li Jingkui

“Animal spirits” is the core concept with which Keynes overturned the rationality assumption of classical economics and propelled the “Keynesian Revolution.” However, the formalization wave in mainstream macroeconomics after World War II transformed this concept from a philosophical notion in the Keynesian context into a modelable analytical variable within the rational expectations framework. This study investigates the conceptual transformation and theoretical costs involved in the formalization of Keynes’ “animal spirits,” beginning by delineating the core connotations, philosophical origins, and essential characteristics of the concept within Keynesian thought. Then, taking the “Lucas critique” as a point of departure, it examines early formal modeling attempts through classic models to analyze how the original connotations were captured or discarded. It is found that while early modeling integrated “animal spirits” into mainstream macroeconomics via rational expectations, microfoundations, and equilibrium analysis, it sacrificed the core philosophical connotations of Keynes’ original intent, such as uncertainty and entrepreneurial decisiveness. This necessary trade-off in formalization constitutes a theoretical cost, yet it has also carved out a theoretical space for the revival of the concept in 21st-century behavioral macroeconomics.