The etymology of humor shows it represented bodily fluids. It is understood that there was a belief in the ancient time, when each type of bodily fluids were attributed to particular state of mind. But it is not clear how it ended up representing something funny.
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According to the humors theory of physiology, both mental and physical health are dependent on a balance of the four primary humors: bile, black bile, phlegm and blood. A person who has an excess of one humor and a deficiency of the others is out of balance and is accordingly spoken of (still) as being out of temper (Latin temperare, 'mix') or as having a melancholy, bilious, phlegmatic or sanguine temperament.
Humor thus came to be a synonym for imbalance or eccentricity of character, the stock-in-trade of intellectual Renaissance comedy. Ben Jonson for instance wrote a popular play, Every Man In His Humour, and a sequel, Every Man Out of His Humour; the prologue of the latter defines the comic treatment:
Over the next century, humor passed by degrees from signifying what makes a character ridiculous to anything which excites more or less sympathetic laughter.