Sunday, October 22, 2017

The "Animal Spirits" Explanation of Risk Preference

This book was quite popular  when I was in junior high school and high school.  It articulates a theory of territoriality - intra-species aggression is triggered when one animal goes onto another's turf.  It also gives the example of the peacock who struts as a way to intimidate other males of the species and to attract females.


There is then the very general idea in Darwin's theory of evolution about fight or flight.  While if the circumstances are right each animal can be seen to engage in the behavior that is not typical, we tend to think that certain animals (hawks are emblematic) who will naturally fight while other animals (doves are emblematic) who will naturally flee.

You can think of these behaviors as expressions of emotion:
Fight ---- Anger (risk seeking)
Flight ---- Fear  (risk averse)

Within economics, Thorstein Veblen articulated a theory of "conspicuous consumption" that in conception is remarkably like the peacock who struts.

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