The key to understanding this situation lies in the concept of secular stagnation, first put forward by the economist alvin hansen in the 1930s. Secular stagnation and the zero lower bound this brings us to the secular stagnation hypothesis put forward by hansen 1939. Hansen, delivered the presidential address, titled economic. Hansen who fused continental analysis with keynesianismthe hansen of the late thirties and the war yearswas above all and appropriately associated with the theory of secular stagnation, which was hinted at by keynes and now comprehensively developed. Aer the economics of secular stagnation aer vol 105 no. Technological progress, globalization, and secular stagnation. After being forgotten for decades, the concept was revived in november 20 by larry summers, who defined it as a situation in which the economy is unable to approach its potential growth rate, for reasons that include the difficulty of sufficient.
Thus, for example, if the natural rate of interest is 4%, then there is no equilibrium that is consistent with inflation below 4% in steady state. The issue of secular stagnation was rst raised in 1938 by alvin hansen 1939 in his presidential address economic progress and declining population growth, delivered nine years after the onset of the great depression, when he. Alvin harvey hansen august 23, 1887 june 6, 1975, often referred to as the american. Hansen proposed a demandbased explanation for the us economys tendency to stagnate. This paper discusses the transition from a perspective in which the determination of income, output, and unemployment was seen as a part of the theory of the business cycle to one in which they are determined independently of the cycle, a transition that meant that the theory of output came to be more sharply separated from the theory of growth. A supplyside view secular stagnation on the supply side takes the form of a slow 1. Lately, theories of economic stagnation have become more associated with hansens ideas than with those of. Room acoustic parameters described in iso where derived. Not only alvin hansen, but keynes and hicks were involved in the conversations that led to hansens eventual statement of the thesis that we are. The basic notion behind secular stagnation is this that the capitalistic economy is basically characterized with instability. National bureau of economic research 1050 massachusetts avenue cambridge, ma 028 october 2014 we would like to thank olivier blanchard, john. Secular stagnation rediscovery of idea proposed in. In recent years, the slow pace of economic growth, high indebtedness, and high unemployment registered in most developed economies since 2009 have revived the debate over the secular stagnation hypothesis first formulated by the keynesian economist alvin hansen in 1938.
It is important to be clear about the qualification, since the secular stagnation hypothesis was always as much a policy prescription as a. It explores some 19th century antecedents of the thesis, before turning to its interwar development. The original theory of secular stagnation is generally attributed to the great depression era harvard economist alvin hansen. While some economists like brad delong and paul krugman instantly recognized summerss contribution, a large share of the economics profession remained skeptical at first.
In december, one of the most eminent economists of the time, alvin e. As with peter thiels and robert gordons updating of schumpeter, keyness arguments also have modern carriers, as in lawrence summerss revival of alvin hansens secular stagnation arguments. Those with very high incomes have a relatively low propensity to consume, and virtually all the income gains in the us have gone to those with very high incomes. The rate of economic growth is determined by technological progress and population growth. Hansen was a student of business cycles throughout his professional. The term secular stagnation was coined by alvin hansen 1938, 1939 in response to the great depression and the sharp downturn of 193738. The supply side of secular stagnation refers to potential real gdp. Alvin hansens economic progress and declining population growth aea. Lawrence summers produced a big upset within the economics profession when he revived alvin hansens theory of secular stagnation, which had been thought of as an oldkeynesian fallacy.
The idea of secular stagnation was originated by the keynesian economist alvin hansen in 1937 to explain why the new deal programs were not working to produce economic growth. Lawrence summers deserves a nobel prize for reviving the. Secular stagnation an equilibrium at less than full employment. Alvin hansen on economic progress and declining population growth the driving forces of economic growth, according to the mainstream of classical economic thinking, are threefold.
Summerss analysis, however, largely concentrates on low nominal interest rates as an indicator of excess savings. The concept of secular stagnation was introduced in 1938 by alvin hansen, who was concerned that investment might be too low to achieve full employment. Alvin hansen on economic progress and declining population. Larry summers used it again in 2014 at the imfs fifteenth jacques polak annual research conference. Secular stagnation hansens thesis features secular.
The result is that excessive saving acts as a drag on demand, reducing. The paper looks at the development of the secular stagnation thesis, in the context of the economic history of the time. Hansen 1941 359 a loss of investment outlets of this magnitude would make far more difficult the achievement of full employment. This return of the secular stagnation hypothesis occurred in november 20, when lawrence summers postulated that the. Hansen was manifestly wrong, in the sense that what prevailed after he wrote those words in 1939 was by no stretch secular stagnation. The phrase secular stagnation was coined by harvard economics professor alvin hansen in 1938. In the late 1930s hansen hypothesized that the united states economy had reached secular stagnation and would never grow as fast as it had before because all the important ingredients for growth had been exhausted. Summers theory of secular stagnation a term first used by the economist alvin hansen back in holds that, in the united states, the. Professor of economics, american university, washington, dc 20016, usa. The empirical dimension of hansens secular stagnation thesis was critically examined. Alvin hansen secular stagnation pdf in december, one of the most eminent economists of the time, alvin e. Investment opportunities, according to his explanation.
Nor are currency wars, a coinage we hear all too often today, a new phenomenonthe interwar period was. The economies of the industrial world, in this view, suffer from an imbalance resulting from an increasing propensity to save and a decreasing propensity to invest. A third possible explanation for secular stagnation, due originally to hansen 1938, is that the rate of investment is being dragged down by a low rate of population growth, as first the advanced economies and now emerging markets undergo the demographic transition to slower rates of natural increase. The us economy has experienced a slowdown in its longterm growth. Former treasury secretary larry summers, shown in 2014, says were witnessing a period of secular stagnation. Mandel ngan afpgetty images originally published on september 6, 2019 9. Hansen18861895approachedbusinesscycleanalysis broadlyfromthetheoretical. It suggests a change of fundamental dynamics which would play out only in its own time. Economic progress and declining population growth jstor. Iso 33821 pdf in this paper a selection of the most important iso parameters is at hz.
The basic idea was that businesses and investors had run out of useful ways to put their assets to work to produce economic growth. In this context, the term secular means longterm from latin saeculumcentury or lifetime, and is used in contrast to cyclical or shortterm. Both of these forces are secular in the sense they. Pdf consumer motivation in developed economies with. Gordon alvin hansen 1939 popularized the term secular stagnation, and we are now, at the suggestion of larry summers 2014, considering the application of hansens term to the current us economy, because the pace of out. Id like to read this book on kindle dont have a kindle. Alvin hansens secular stagnation hypothesis macromania. Read or download secular stagnation at shakespir, your free ebook reading partner. March progress, the development of new industries, the discovery of new resources. Alvin hansen and the origins of the stagnation thesis. Dunning kruger sendromu pdf beyond personal training.
Secular stagnation uc san diego department of economics. Shigeko enters into a treaty with saga, whose army defeats arai zenko, and she will marry him as part of the bargain ce ensure. In economics, secular stagnation is a condition when there is negligible or no economic growth in a marketbased economy. Some time ago speaking at the imf, i joined others who have invoked the old idea of secular stagnation and raised the possibility that the american and global economies could not rely on normal market mechanisms to assure full employment and strong growth without sustained unconventional policy support.
Gordon alvin hansen 1939 popularized the term secular stagnation, and we are now, at the suggestion of larry summers 2014, considering the application of hansens term to the current us economy, because the pace of. In 1938, a danishamerican economist named alvin hansen gave a. Hansen, delivered the presidential address, titled economic progress and declining population growth, at the annual meetings of the american. Gordon alvin hansen 1939 popularized the term secular stagnation, and we are now, at the suggestion of larry summers 2014, considering the application of hansen s term to the current us economy, because the pace of out.
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