Sooner or later, we have to talk about the economy and there are perhaps no greater influences on thinking in Washington today than Adam Smith’s “invisible hand” and Keynes’ “animal spirits.” Let me outline for you the difference between the two:

Adam Smith: Smith believed that the result of lots and lots of people acting in their best interests would create in the aggregate a functioning market with full employment. His thinking was that people could offer their services to business at whatever price they wanted and so long as the business could pay that amount and make a profit, they would hire.

Smith felt that government intervention would only get in the way. If left to their own devices, the “invisible hand” of individuals and businesses acting rationally would create a healthy economy.

John Maynard Keynes: Keynes lived during the Great Depression and as a result had a different point of view than Smith. He saw that at times things could go wrong and that the main reason was that people are people. People don’t always act rationally and that is where the “animal spirits” part comes in.

Keynes believed that leaving people to their own devices would not work to maintain a healthy economy. Booms and busts are the result, he felt, of alternating feelings of confidence, doubt, anxiety, fairness and trust. As a result, the government needed to be ready to bring logic, stimulus and moderation to the party, Keynes believed.

Most in Washington today lean closer to Keynes than Smith. The last few years have taught us that not only are people sometimes irrational but also that “animus” can be influenced by promoters, marketers and influence makers. The housing bust, for example, is fundamentally about people believing that housing prices would always go up – an attitude fostered by many who had an economic interest in seeing that happen.

Jim Randel is the founder of The Skinny On book series. His latest book, The Skinny on Success, is in stores now.