Business hates uncertainty. When a business feels uncertain, that business waits to invest. Economic growth is thus retarded. A negative feedback loop unfolds. Today, business delays investment because of uncertainty about President Joe Biden’s policies on energy, the environment, and many other matters. The economy is reasonably healthy, but business investment would certainly be higher, and gasoline prices would be lower, if Biden were clear about his policies.
In 1980, former Federal Reserve Chairman Ben Bernanke wrote a seminal paper about uncertainty and business investment. Bernanke’s research demonstrated that businesses defer investment when they are uncertain about the future. Bernanke wrote that “uncertainty increases the value of waiting for new information, so, the current rate of investment is retarded.”
