This, he claimed, caused the build-up of debt and risk-taking, which ultimately led to the onset of the Great Recession. Likewise, Michael Wicken concluded that “… the financial crisis was brought about more by a failure to employ modern macroeconomics than by its failings.
TFP is that part of productivity that is not explained by capital investment or labor quality; it is thought to be mainly a function of technological innovation.5 A broad decline in the dynamism in our economy may also be contributing to lower TFP.6 There is strong evidence that the slowdown in TFP growth in the United States preceded the financial crisis, particularly in sectors that produce or use information technologies.7 The range of opinions on the future path of productivity growth is wide, and the historical record provides ample grounds for humility.8 A middle-ground position that seems to underlie many current forecasts is that productivity is probably still being held down by cyclical factors and lingering effects of the crisis.