According to the article n the New York Times by Robert Shiller, consumer confidence in the United States has been increasing consistently since the 2008 financial crisis. This apparent increase in consumer confidence has been fueling the country’s economic expansion since 2009. Consumer confidence is an amorphous reason for the expansion of the economy since its stimulus is vague. This is also despite there being an upturn and downturn of consumer confidence in this period, which seems to have had little influence on the expansion of the economy. Even events such as the shutdown of the American government in 2013 and political turmoil have done little to dim this confidence.
In attempting to explain the consumer confidence phenomenon, Shiller places this growing confidence on the recovery from the 2008-2009 financial crises. Indeed, according to this line of thought from a microeconomic viewpoint, increasing confidence is fundamental after a crash since both consumers and firms since recovery also means opportunity for growth where the attitude is that it cannot get any worse. Additionally, government policies at the macro level during and after such crises involve measures to plug any leak economically, leading to more confidence at the micro level.
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Concomitant with recovery according to Shiller, is the ‘animal spirit’ effect. Shiller explains this effect as the human nature of becoming carefree, and instead looking to entrepreneurship and consumerism, which is led by optimism. This animal spirit effect is immeasurable as presented by the author, but it is comprehensible in how it could fuel consumer confidence. In an economy that is recovering, exuberance is high; spending is also high as consumers take up new opportunities. Shiller illustrates this by looking at the Standard & Poor stock index, which are very high despite this high level only being as a result of how earnings are valued as opposed to actual earnings increases.
In conclusion, consumer confidence is a major booster of economic expansion. However, it is not supported by a concrete base. A stronger base for economic expansion might be a better driver of growth.
References
Shiller, J. R. (2018). Consumer Confidence is Lifting the Economy. But for How Much Longer?
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