The problem with this view is that the economists who, in a cavalier manner, invoked 'secular stagnation'- people like Krugman & Summers- experienced a precipitous decline in credibility during the period. Of course, the same could be said of the author.



What is the point of an Economist, as opposed to a Minister of Religion, saying 'the economy will always be evil till everybody becomes good and farsighted and loving and nice'?

That is what Stiglitz is doing here. This once great economist writes- 'Unless and until the selfishness and myopia that define our politics is overcome, an economy that serves the many, rather than the few, will remain an impossible dream'. If people weren't selfish and myopic we wouldn't need an economy. Everybody would work to the best of their ability and render unto others as much as they might need.

Myopia is a good thing if the fog of Knightian Uncertainty prevails. Selfishness is a good thing if information asymmetry obtains. Economics is a worthwhile field of study only under these two conditions.



The income of the majority of citizens everywhere will always stagnate unless the majority is hell bent on improving its income and exits or causes others to exit or, in any case, prevents entry into the biggest labour markets.



A Gandhian India where everybody is unselfish and so long-sighted as to see through the delusion of materialistic affluence is one where the majority of citizens experience falling real income. In 1964, the diminutive Gandhian P.M of India was telling Indians to skip a meal while begging for PL480 shipments to feed a nation of farmers! As the late VS Naipaul noted, Indians got shorter, had less stamina and lower I.Q because of chronic malnutrition under 'Gandhian Socialism'. BTW, India had superb mathematical economists and received advice from the top econometricians of the time.



Stiglitz is right to say that those lazy pundits who lazily invoked secular stagnation were lazy and stupid- but everybody already knows this. When was the last time Krugman got any prediction right? What's was the last sensible thing he said? Would any country be crazy enough to invite Summers to help reorganise their economy?



Is Stiglitz correct to say Obama should have adopted an expansionary fiscal policy? No. The man tried and backed down when he saw that the initiatives he backed had a negative rate of return. They were distorting R&D priorities. They increased global vulnerability to craziness in the MENA region. Fracking, by contrast, proved an effective tool against that craziness. It could have been better managed- but not by the Government. An expansionary Keynesian policy depends on the Govts. capacity to make sensible investments. It was glaringly lacking in some New Deal programs of the Thirties and things have actually got worse since then. Bureaucrats have gotten stupider, not smarter.



So long as geriatric views of the economy prevail, it is a good thing if there is a pro-cyclical policy so that there can be a swifter, sharper, shock and shakeout for the real economy. So long as certain essentially mischievous asset classes, which are the equivalent of cocaine to Wall Street, are also decimated, this yields a better economy than taking Keynesian medicine in bad times and ending up addicted to Oxy.