Must-Read: Paul Krugman: Fairy Tales
Must-Read: As Keynes is rumored to have always said when anyone asked him about where any idea came from, “it’s in Marshall”…
: Fairy Tales: “The origins of the phrase ‘confidence fairy’…
…I’m pretty sure–you can never be completely sure, because things can stick in your mind–that it was an original coinage on my part, a snappy way to characterize the deep implausibility of the Alesina-Ardagna stuff that was sweeping Brussels and other corridors of power in 2010…. But confidence-fairy type arguments and critiques of the same go back a long way…. And there’s a reason. As Mike Konczal, channeling Kalecki, pointed out … arguments rejecting Keynes and declaring that only business confidence can achieve full employment serve [the] very useful political purpose… [of] empower[ing] plutocrats and big business…. This is the story of Greece right now…. Syriza [has] no policy tools, nothing it can do except try to placate investors, which means… macro punishment… [and] forced… privatization…
Paul Krugman’s July 2010 use of the phrase “confidence fairy” is certainly the very first use of it in economics I have been able to find. But Alfred (and Mary) Marshall do have their 1885 “if confidence could return, touch all industries with her magic wand…” But I cannot imagine that Paul Krugman ever had enough idle time that reading all the way into the back of Economics of Industry seemed like a good idea…
And I want to push back against the Kalecki line: I don’t doubt that rich people think high unemployment and recession disciplines both the working class and the unworthy speculators, and so leaves them able to hire at a low wage and to pick up stranded assets cheaply. But it is not really true: America’s rich would have been better off in absolute terms (albeit not in relative) with growth at the pre-2007 trend since than they are now, and would definitely have been better off both in absolute and in relative terms without the Great Depression…