Greg Mankiw’s Blog: Lucas on the Great Recession
Slides, based on a talk Nobelist Robert Lucas recently gave.
[Excerpts from the slides: -JR]
• In effect, “shadow banking system” was created, uninsured and unregulated.
• The economics of the 2008 “credit freeze” following the Lehman Brothers failure were identical to the economics of the 1930s bank runs…
• Liquidity is no longer the problem
• Yet business investment remains very low…
• Believe it is more accurate to say that the problem is government is doing too much…
• Is it possible that by imitating European policies on labor markets, welfare, and taxes U.S. has chosen a new, lower GDP trend?
• If so, it may be that the weak recovery we have had so far is all the recovery we will get