Keynesians on Uncertainty I

Please feel free to email me material for this series. Current Keynesians would be great, but I think getting a sampling of past Keynesians would be very interesting as well. It's a very important subject that shouldn't boil down to "what Robert Higgs said about the Great Depression", although I think Higgs's work is interesting as well.

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Varieties Of Uncertainty, Paul Krugman, October 13 2011

"Some of the usual suspects have lately been touting a research paper by Baker et al that supposedly shows that policy uncertainty is an important factor in restraining the economy, and claiming that this vindicates the Republican view. Larry Mishel sets the record straight.

As Mishel points out, the first thing you need to know is that the index of uncertainty is based on a count of news stories. This means that if the Murdoch empire decides to push the line that there’s a lot of policy uncertainty, the authors’ index measures this as a real rise in uncertainty, not as the propaganda campaign it is.

But even setting that aside, what the paper measures as “uncertainty” isn’t at all what the right wants you to think is driving events. Health reform does not visibly move their index; what really sent it sky-high was the debt ceiling dispute. So you could argue that the real policy uncertainty here isn’t fear of that socialist Islamic atheist in the White House; it’s fear of Republican hostage-taking. That, at any rate, comes closer to what seems to be going on in the analysis.

Another fake claim of empirical vindication of right-wing dogma bites the dust."