Economic The question about secular stagnation that always has bugged...

The question about secular stagnation that always has bugged me – Marginal REVOLUTION

-

- Advertisment -

I have never understood how savings is supposed to remain above investment for extended periods of time.  In a recent Op-Ed, Krugman summed up the secular stagnation view nicely, but you will find similar claims all over:

To maintain full employment, a market economy must persuade businesses to invest all the money households want to save.

If the demand to investment is so low, why don’t the prices of investment goods fall, thereby increasing the marginal return to new investment?  (I do get why the zero lower bound may limit the ability of interest rates to fall).  That would then equilibrate planned savings and planned investment once again and eliminate the savings overhand.  Of course price stickiness may prevent this from happening in the short run, but secular stagnation is a longer run theory.

This point resembles Hayek’s response to Foster and Catchings way back when.  Has it been answered?

Latest news

JIF Creamy Peanut Butter 16-Ounce Jars for just $1.65 each, shipped!! | Money Saving Mom®

Home » Deals » JIF Creamy Peanut Butter 16-Ounce Jars for just $1.65 each, shipped!! Published: by Meg on June...

Argentina averts default in debt deal with Paris Club

Argentina has reached a deal to avoid another damaging default by delaying the bulk of a $2.4bn payment due...
- Advertisement -

Stocks making the biggest moves in the premarket: GameStop, MicroVision, Sanderson Farms & more

Take a look at some of the biggest movers in the premarket:GameStop (GME) – The videogame retailer's stock jumped...

Morgan Stanley will bar workers without Covid vaccinations from most New York offices beginning July 12

Morgan Stanley on Tuesday told its staff that workers and clients who are not vaccinated against Covid-19 will be...

Must read

- Advertisement -

You might also likeRELATED
Recommended to you