Identifying the determinants of secular stagnation after the Great Recession: Learning from Hansen ́s historical approaches and Harrod ́s model along 1938-1952
Adrián de León-Arias
Universidad de Guadalajara (Mexico)
Please cite the paper as:
Adrián de León-Arias, (2016), Identifying the determinants of secular stagnation after the Great Recession: Learning from Hansen ́s historical approaches and Harrod ́s model along 1938-1952, World Economics Association (WEA) Conferences, No. 1 2016, Capital Accumulation, Production and Employment:, 15th May to 15th July 2016
In the recent debate about “back to business as normal” after the Great Depression (2008-?), the possibility of an extended condition of low economic growth in the U.S. and other countries in the medium term has been related to the pattern of secular stagnation; see for instance, works compiled by Teulings and Baldwin (2014), Solow (2014), and even mentioned by Greenspan (2014), among others.
However, while the concept and development of secular stagnation, as an eventual significant shift in the investment motives due to low growth in population, productivity growth, a specific pattern of technological change and geographical expansion, was developed fundamentally by Alvin Hansen in late 1930 ́s. And then, due to the economic expansion after II WW and the lack of a model to identify the condition of secular stagnation in an economy, the concept was neglected and almost forgotten in the economics toolkit, therefore its use in current times has brought some confusion.
In this paper, in order to amplify the explicative capacity of the concept of secular stagnation, I develop a framework to identify the elements that determines the condition of economic stagnation in an economy through the review of the original concept in Hansen, and other developments by Roy F. Harrod. In particular, this framework reflects an explanation of the determinants of economic stagnation due to disequilibrium between greater desired savings and lesser planned investment (mostly autonomous) given a technological change slowdown and slower population growth.
The conceptual clarification of the concept of secular stagnation will also help to differentiate other conditions of low rate of economic growth such as those related to negative real interest rates or price disequilibrium (Backhouse and Boianovsky, 2015) that have been close related to the secular stagnation à la Hansen/Harrod.
It may relevant to note that there are other explanations of current stagnation that follow different lineages: Cowen (year) à la Schumpeter and Koo (2009, 2014) à la Fisher. However they will not be reviewed in this paper, although they may be included in the framework to be developed here.
In this paper, I also suggest that the secular stagnation concept while localized in the economic growth/business cycle framework and as developed in my framework offers relevance for current discussion on secular stagnation in present times.