Excellent thoughts from Greg Mankiw on the importance of investment for this recession in this article. He specifically highlights the importance of investment for Keynesians, contrasting it with the consumptionism you hear from more popular sources:
"Yet fluctuations in investment spending, rather than being only a passive response, are also one of the driving forces of the booms and busts of the business cycle. The great economist John Maynard Keynes suggested that investment spending is in part determined by the “animal spirits” of investors, which he described as “a spontaneous urge to action rather than inaction.” Recessions occur when optimism turns to pessimism, and businesses are reluctant to place bets on a prosperous future. Recovery occurs when investor confidence returns."
"Animal spirits" is always a little vague when it is invoked, and it sounds a little hokey. Of course all that is meant by that is the expected yield of a specific investment. Those expectations - for obvious reasons - can be unstable, hence "animal spirits".
All the suggestions for dealing with the investment problem are excellent. Hopefully this helps put to rest the idea that Keynesians offer a consumptionist vision. The one suggestion that is missing from the list is further fiscal stimulus (although note he nevertheless doesn't jump on the Bob Higgs austerity bandwagon... this op-ed is very different from the one Barro recently wrote). I imagine that has a lot to do with the fact that Mankiw is advising Romney now.
Mankiw also addresses an idea that Andrew Bossie has been raising in the comments. I think Andrew is right that housing has dragged down investment figures and it's worth noting that that is a major driver of the numbers, but Mankiw points out:
"While the sluggish housing market can explain the slow pace of residential investment, it is not the whole story. Business investment has also been weak. Over the last two years, nonresidential fixed investment has grown by only 12 percent, whereas during the two years after the 1982 recession, it grew by 27 percent. Similarly, the narrow category of spending on business equipment and software fell more than twice as much in this recession as it did in the 1982 recession, and it has been slower to recover."
The terribleness of some big company searches
14 hours ago