How the Great Moderation Became a (Contained) Depression and What to Do about It

Trinity College Department of Economics Working Paper 13-03

13 Pages Posted: 20 Feb 2013

See all articles by Barry Z. Cynamon

Barry Z. Cynamon

Better Future Forward; Jain Family Institute

Steven M. Fazzari

Washington University in St. Louis

Mark Setterfield

New School for Social Research

Date Written: February 19, 2013

Abstract

The Great Recession was deep and the subsequent recovery has been slower than most economists predicted. This article summarizes the message of a recent book that presents perspectives from a group of Keynesian economists who warned prior to 2007 of dangerous trends that could lead to these unfavorable outcomes. We discuss how the debt-fueled consumer boom leading up to the Great Recession was unsustainable and how rising inequality has compromised demand generation during the feeble recovery. We conclude the article by considering how public policy must respond in coming years.

Keywords: Great Recession, Great Moderation, economic recovery, Keynesian macroeconomics

JEL Classification: E21, E25, E61

Suggested Citation

Cynamon, Barry Z. and Fazzari, Steven M and Setterfield, Mark, How the Great Moderation Became a (Contained) Depression and What to Do about It (February 19, 2013). Trinity College Department of Economics Working Paper 13-03, Available at SSRN: https://ssrn.com/abstract=2220855 or http://dx.doi.org/10.2139/ssrn.2220855

Barry Z. Cynamon

Better Future Forward ( email )

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HOME PAGE: http://www.betterfutureforward.org

Jain Family Institute ( email )

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Steven M Fazzari

Washington University in St. Louis ( email )

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314-935-4156 (Fax)

Mark Setterfield (Contact Author)

New School for Social Research ( email )

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New York, NY 10003
United States

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