The Great Depression and New Keynesian Economics
30 November, 2012 at 16:27 | Posted in Economics | 4 Comments
It was frequently argued that the Great Depression was the ultimate recession, implying that the difference between ordinary recessions and the Great Depression is simply a matter of degree. To produce prolonged recessions while assuming that companies are always forward looking and profit maximizing, the profession had turned to the so-called (New) Keynesian school, with its heavy reliance on various sorts of price “stickiness.” … But although price rigidities or stickiness can be used to explain short-term unemployment and recessions, they cannot explain longer-term downturns …
By incorporating the concept of debt minimization, the economics profession is finally freed from its reliance on gimmicks such as price and wage stickiness and rigidity to explain long-term recessions.
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Good points, but as a book it is repetitive.
Comment by Sophette50— 30 November, 2012 #
I absolutely agree, Koo’s main argumentation could have been presented in 50-60 pages.
Comment by Lars P Syll— 30 November, 2012 #
Great Book, a must about the japan crisis and the 2008 crisis too !
Comment by Herr Zayd— 30 November, 2012 #
Yes it’s great (actually the only thing I miss in it is an effort to relate to Minsky’s theory).
Comment by Lars P Syll— 30 November, 2012 #