The University of Michigan released its Consumer Sentiment Index measurements today. Thanks to the sledgehammer lockdown of the U.S. economy, the index took its biggest one-month plunge ever recorded. When sizing up the health of the economy, it’s always important to gauge the public’s state of confidence.

Regardless of the particular economic problem being analyzed or the analytical apparatus used to diagnose it, confidence plays a critical role. Economists have long recognized the importance of confidence. Indeed, most economists find extremes hard to explain — either booms or busts — without reference to it. For example, the American economist Wesley Clair Mitchell (1874–1948) wove “business sentiment” into much of his pioneering work on business cycles. He was not alone.

Members of the Cambridge School of Economics, which was founded by Alfred Marshall (1842–1924), all concluded that fluctuations in business confidence are the essence of the business cycle. As John Maynard Keynes put it, “the state of confidence, as they term it, is a matter to which practical men pay the closest and most anxious attention.” That is, of course, why Keynes put great stress on changes in confidence and how they affected consumption and investment patterns. Frederick Lavington (1881–1927), a Fellow of Emmanuel College and the most orthodox of the Cambridge economists, went even further in his 1922 book The Trade Cycle. Lavington concluded that, without a “tendency for confidence to pass into errors of optimism or pessimism,” there would not be a business cycle.

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As the sledgehammer is lifted, confidence will have to be jump-started if the economy is to regain traction. Given the damage that’s already been inflicted and the massive ratcheting up of the post-COVID-19 politicization of American economic life, my guess, and it’s only a guess, is that confidence will be slow to return and that the recovery from our economic nightmare will be gradual and uneven.