Confidence enters macroeconomics through the Stock Exchange. ‘In the absence of securities markets,’ Keynes explained, ‘there is no object in frequently attempting to revalue an investment to which we are committed.’ The farmer cannot ‘remove his capital from the farming business’ on a whim, then ‘reconsider whether he should return to it later in the week’. Before securities trading was common practice, the farmer’s confidence, the shipper’s confidence and the realtor’s confidence had no impact on the simple supply-and-demand logic that set the prices for their goods. ‘But the Stock Exchange revalues many investments every day, and the revaluations give a frequent opportunity to the individual … to revise his commitments.’
At the Exchange, one can buy corn, even when corn is not in season, or a stake in a building, even when no tenants are moving in or out. Securities can be invented, amalgamated, contracted or split. Under the pressure of constant negotiation, confidence becomes an essential consideration because prices respond to even the smallest changes in perception, changes that can be based on reliable information, compelling narratives or abject rumours about specific companies, whole industries or the entire economy. When corporations are motivated by and reliant upon stockholders, small changes in the state of confidence towards a single company can produce butterfly effects through the whole economy.
Eighty years before Keynes published The General Theory, Melville stated plainly: ‘Confidence is the indispensable basis of all sorts of business transactions. Without it, commerce between man and man, as between country and country, would, like a watch, run down and stop.’ The Confidence-Man was equal parts experimental fiction, political economy and prophecy. Via a series of loosely connected vignettes set aboard a Mississippi steamboat, Melville, at the height of his powers, demonstrated how confidence could be made to mean everything and nothing. It could lubricate the gears of commerce or grind them to a halt; sweep up the individual in the ‘cosmopolitan and confident tide’ of ‘that multiform pilgrim species, man’ or leave him ‘in the dark’ with nothing but his own doubts, and possibly the devil, for company.
The novel drove Melville to the brink of madness. Upon its completion, he told his friend, the fellow American novelist Nathaniel Hawthorne, that he had ‘made up his mind to be annihilated’, and he abandoned his craft. The author of Moby-Dick lived another 34 years, but never published another novel. He contracted the crisis of confidence that his novel was designed to discourage and, soon thereafter, so did the nation. Six months later, Melville’s publisher was bankrupted in the Panic of 1857, and its warehouse burned to the ground with the unsold copies of his novel inside. For close to a century, almost nobody read it.