Secularly Stagnated Economy
A Secularly Stagnated Economy is a regional economy that low economic growth is the new macro economic norm.
- Example(s):
- The theory/prediction of Alvin Hansen in the 1938 (that made a wrong prediction).
- ...
- Counter-Example(s):
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- See: Agricultural Productivity.
References
2018
- (Wikipedia, 2018) ⇒ https://en.wikipedia.org/wiki/Secular_stagnation_theory Retrieved:2018-9-7.
- The secular stagnation theory was originally put forth by Alvin Hansen in 1938 to "describe what he feared was the fate of the American economy following the Great Depression of the early 1930s: a check to economic progress as investment opportunities were stunted by the closing of the frontier and the collapse of immigration". Warnings similar to secular stagnation theory have been issued after all deep recessions, but they usually turned out to be wrong because they underestimated the potential of existing technologies.[1] Secular stagnation refers to "a condition of negligible or no economic growth in a market-based economy". In this context, the term secular is used in contrast to cyclical or short-term, and suggests a change of fundamental dynamics which would play out only in its own time. Alan Sweezy described the difference:
According to Seymour Harris (1943) "the idea of secular stagnation runs through much of Keynes General Theory"."But, whereas business-cycle theory treats depression as a temporary, though recurring, phenomenon, the theory of secular stagnation brings out the possibility that depression may become the normal condition of the economy."
- The secular stagnation theory was originally put forth by Alvin Hansen in 1938 to "describe what he feared was the fate of the American economy following the Great Depression of the early 1930s: a check to economic progress as investment opportunities were stunted by the closing of the frontier and the collapse of immigration". Warnings similar to secular stagnation theory have been issued after all deep recessions, but they usually turned out to be wrong because they underestimated the potential of existing technologies.[1] Secular stagnation refers to "a condition of negligible or no economic growth in a market-based economy". In this context, the term secular is used in contrast to cyclical or short-term, and suggests a change of fundamental dynamics which would play out only in its own time. Alan Sweezy described the difference:
- ↑ Pagano and Sbracia (2014) "The secular stagnation hypothesis: a review of the debate and some insights." Bank of Italy Questioni di Economia e Finanza occasional paper series number QEF-231.
2018b
- (Stiglitz, 2018) ⇒ Joseph Stiglitz. (2018). “Why all economists must learn lessons before next US downturn.” In: The Guardian, 2018-09-06
- QUOTE: ... as Larry Summers rightly points out, the term “secular stagnation” became popular as the second world war was drawing to a close. Alvin Hansen (and many others) worried that, without the stimulation provided by the war, the economy would return to recession or depression. There was, it seemed, a fundamental malady. But it didn’t happen. How did Hansen and others get it so wrong? Like some modern-day secular stagnation advocates, there were deep flaws in the underlying micro- and macroeconomic analysis – most importantly, in the analysis of the causes of the Great Depression itself.
As Bruce Greenwald and I (with our co-authors) have argued, high growth in agricultural productivity (combined with high global production) drove down crop prices – in some cases by 75% – in the first three years of the depression alone. Incomes in the country’s major economic sector plummeted by around half. The crisis in agriculture led to a decrease in demand for urban goods and thus to an economy-wide downturn.
- QUOTE: ... as Larry Summers rightly points out, the term “secular stagnation” became popular as the second world war was drawing to a close. Alvin Hansen (and many others) worried that, without the stimulation provided by the war, the economy would return to recession or depression. There was, it seemed, a fundamental malady. But it didn’t happen. How did Hansen and others get it so wrong? Like some modern-day secular stagnation advocates, there were deep flaws in the underlying micro- and macroeconomic analysis – most importantly, in the analysis of the causes of the Great Depression itself.
2014
- (Summers, 2014) ⇒ Lawrence H. Summers. (2014). “US Economic Prospects: Secular Stagnation, Hysteresis, and the Zero Lower Bound.” Business Economics 49, no. 2
- ABSTRACT: The nature of macroeconomics has changed dramatically in the last seven years. Now, instead of being concerned with minor adjustments to stabilize about a given trend, concern is focused on avoiding secular stagnation. Much of this concern arises from the long-run effects of short-run developments and the inability of monetary policy to accomplish much more when interest rates have already reached their lower bound. This address analyzes contemporary macroeconomic problems and proposes solutions to put the U.S. economy back on a path toward healthy growth.