SHOULD PRESIDENTS GIVE PEP TALKS?

SHOULD PRESIDENTS GIVE PEP TALKS? Robert Shilller, who was one of the economists who foresaw the financial crisis, had an article in the Financial Times (February 18) with the headline: “America is in need of a pep talk.” Professor Shiller argues that “over-confidence…was not managed by leaders…and its subsequent collapse represents the deepest cause of the financial crisis.” Now, he points out, the under-confidence makes individuals and businesses reluctant to invest and consume—prudent for the individual and bad for the economy. Shiller points to President Roosevelt’s success in 1933 in encouraging confidence, but says that “successes in managing economic confidence are legendary, but rare.” That is, sometimes it works.