David Barber wrote: > Recently, Robert Shiller, a professor of economics at Yale University, penned a New York Times article warning that the fear of a double dip recession might actually bring on the dreaded event. "Ultimately," Professor Shiller warned, "the risk resides largely in social psychology."
> As someone who is not a professional economist I do not know whether > Professor Shiller's views are typical of his field. < As a professional economists, I'd say that his views are pretty typical. (However, the more right-wing macroeconomists see our subjective visions as corresponding (on average) to reality, as part of the ultra-silly "rational" expectations theory.) > ... The Crash, in short, was not an episode of mass hysteria or panic; it > represented a structural crisis in part rooted in the grossly unequal > distribution of wealth in this society. When millions of Americans could no > longer buy goods, industry had to stomp on the brakes.< It was the progressively greater inequality in the distribution of wealth and income that created the underconsumption undertow, i.e., the conditions where significant GDP growth could only occur based on credit. It was the use of homes as collateral for that credit that formed the basis for the speculative bubble in housing and the construction of a huge superstructure of bizarre financial instruments. It was the speculative bubble and the bizarre financial instruments that meant that social psychology could play a role in the real economy, first as part of the bubble itself and then as triggering the crash. It's the deep fragility of the US economy at present that means that social psychology (and Keynes' animal spirits) can play a bigger role than usual in causing a recovery or continued stagnation or worse. see http://myweb.lmu.edu/jdevine/talks/newOhio.htm or http://myweb.lmu.edu/jdevine/april23Talk.doc -- Jim Devine "Those who take the most from the table Teach contentment. Those for whom the taxes are destined Demand sacrifice. Those who eat their fill speak to the hungry of wonderful times to come. Those who lead the country into the abyss Call ruling too difficult For ordinary folk." – Bertolt Brecht. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
