Jim D. writes:
FWIW, some Marxists advocate a self-correcting recovery like this, though it's not just concerning wages. It also involves mass bankruptcies of usually-smaller capitalists.
[Thanks for reminding us to include the bankruptcy part.] I think Doug was trying indirectly to make similar point about marxists (and, by extension, I could add Sraffians). But WHO, in the last half century, do you think actually says this? (serious question). I mean truly "advocate a self-correcting recovery", as distinct from saying "this downturn won't go on forever but if the recovery is left to its own devices we could lose decades, waste hundreds of trillions and spoil hundreds of millions of lives - we must turn to alternatives now". Mentally, I have tried to run through the list of "crisis theories" popular in the last 50 years and I worry that one may be setting up straw men. But how best should we describe the "business cycle" experience of the last 100 years? I am mindful of Michael's point about the contradictory nature of what we want to describe. I hear Jim and Doug's hesitation over attributing "automaticity" to the upturns from recession or depression. (Keeping in mind the difference between that view and some sort of *acceptable* 'self-correction' mechanism, which is the neo-classical view.) Now let's look at the direct alternative to 'built in' mechanisms accounting for the upturns - i.e. "voluntarism". The "pure" post-keynesian explanation relies on government fiscal/monetary policy as accounting for upturns - nothing inherently structural caused the problem or provides the solution. Future crises have a ready remedy - clever, committed government using only judicious fiscal/monetary policy *without* a requirement for deeper structural change. Perhaps neither "pure automaticity" nor "pure voluntarism" adequately covers all post-war experience - nor represents a tenable political position? And in diagnosing causes and solutions, I think we need to make clear distinctions between so-called short run fluctuations and the long trends and structural problems. (The short run problems may be more susceptible to *either* "built in" or "policy based" corrections than the deeper trends.) This is why I was keen to point people to papers that argue 80/20 or 20/80 rather than 'all or nothing'. And once we leave the black and white world behind, actual empirical evidence and concrete analysis starts to become critical. I am always struck be how very little we know about the big questions in economics. For example, I think it was JD who pointed out on this list that the U.S. has almost no experience with *active* Keynesian fiscal policies (in the Abba Learner/Functional Finance mold); mostly it has been limited to the passive policies of automatic stabilizers and a large stable military budget. [BTW, I think this latter point cuts BOTH ways in the automatic/voluntaristic dichotomy.] Paul
