Yet a number of economists such as Tyler Cowen, Robert Gordon, and Larry Summers have raised the possibility that potential growth in industrial countries had fallen even before the Great Recession. Perhaps then the growth that we are trying to return to is unachievable without serious distortions.
The term “secular stagnation” used by Larry Summers to describe the current persistent economic malaise, echoing Alvin Hansen’s speech in 1938 in the midst of the Great Depression, has caught on.3 But different economists focus on different aspects and causes of the stagnation.4 Summers emphasizes the inadequacy of aggregate demand, and the fact that the zero lower bound as well as the potential for financial instability prevents monetary policy from being more active.