...the best thing government could do to help business would be to spend more, increasing demand.Yes, yes, these ignorant rubes who own small businesses might cite other reasons as to why there is not more longer-term investment and hiring, but face it: the only reason that businesses are not spending is because, well, people are not buying their products.
This contrasts with Robert Higgs' contention that "regime uncertainty" is playing a large role in the current stagnation, just as it did in the 1930s, he said. The difference appears to be that Prof. Higgs actually listens to what business owners are saying, while Krugman does not.
Granted, often in economics we hold to things that might be counter-intuitive to the "man on the street," such as the marginal utility theory of value and the "derived demand" for factors of production. Value of the factors, economists point out, is derived from the value of the final goods, as opposed to the view that governs most voters and public policies: the value of final goods is derived from the value of factors of production.
(This was the reason cited for the government's energy policies of the 1970s, in which Washington held that if it could artificially hold down the price of crude oil, those "savings" would be reflected in the prices for gasoline. Well, it didn't quite work that way, as those of use who were adults during that decade can attest.)
In Krugman's post, however, what he is making is essentially a circular argument: if businesses will spend more, then they will be able to spend more. Sorry, in economics, we don't make or accept circular arguments.
