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S E50: A Conversation with Larry Summers: The Influence of Economic Ideas and the Dangers of Secular Stagnation

Think Like An Economist

CHAPTER

Is There a Secular Stagnation?

Economist alvan hanson proposed that the colonies had a very strong propensity to save, because large amounts of income were going to people who were wealthy. And ifyou had a high desire to save, but there wasn't that much desire to put that money to work, what would happen was that the interest rate would tend to fall to very low levels. The savings would flow into existing assets, and so their prices would be bidy. So you would see economies with very low interest grates with a lack of demand, which meant they diden’t grow very fast,. That could be a fairly free and congenital condition for economis. He proposed that theory in the late

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