Ritalin, Animal Spirits and the Productivity Puzzle

Abstract

AbstractThis article argues the importance of animal spirits throughout the economy in improving productivity performance. It overviews the idea of animal spirits and people's level of confidence in undertaking economic activity. It then notes a gap, a missing residual, in economists' efforts to understand productivity growth. Two well‐documented measures indicating animal spirits are the levels of social trust and of corruption. Surveying the literature, the article shows both of these correlate with economic performance, and demonstrates they are correlated with each other. A case study of the impact of changes in corruption levels shows animal spirits can have significant effects.