In a recent New York Times column, economist Paul Krugman once again took to chastising a claim he has infamously dubbed the “confidence fairy.” According to the Nobel laureate, the “confidence fairy” is the erroneous belief that ambiguity over future government regulation and taxation plays a significant role in how investors choose to put capital to work. To Krugman, the anemic economic recovery in the United States shouldn’t be blamed on this “uncertainty” but rather a “lack of demand for the things workers produce.” Being the most prominent mouthpiece for Keynesian economic policy in modern times, the Princeton professor represents the school’s circular thinking very well. Keynes and his followers saw most economic slumps as being the result of insufficient spending. A slowdown in spending means the animal spirits aren’t so aggressive in their lust for immediate consumables.
