Edward Conard

Top Ten New York Times Bestselling Author

Upside of Inequality Unintended Consequences
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • Macro Roundup
  • Highlights
  • Blog
  • OpEds
  • Reviews
  • About
    • About the Author
    • About the Books
    • Read Excerpts
    • Read the Reviews
    • Debates
    • Media and TV
  • Topics
    • All Media Appearances
    • Productivity
    • Monetary Policy
    • Banking
    • Politics
    • Upside endnotes
    • Stuff Ed’s Assistant Thought He Might Like
  • Contact
  • twitter
  • facebook
  • youtube
  • linkedin
  • Advanced SearchChoose Categories To Search Within
    • Close Advanced Search

Advanced Search

Summers and Krugman Justify Stimulus Using Mian and Sufi’s Hard-to-Believe Theory Subprime Savings Caused Great Recession

Larry Summer and Paul Krugman cite Atif Mian and Amir Sufi’s hard-to-believe theory of the Great Recession to justify fiscal stimulus. In their book, House of Debt, Mian and Sufi claim falling home prices caused highly levered subprime households to reduce consumption and temporarily save a larger portion of their earnings. A more likely scenario is that subprime consumption fell back to sustainable levels when low-income households could no longer borrow against the rising value of their homes and consume more than they earned. In that case, because a Keynesian lull in demand didn’t cause the recession, stimulus could not mitigate a temporary dislocation of resources. Instead, what occurred was a permanent shift in demand, and the cost of dislocation was inevitable. I elaborate on the differences in my review of Mian and Sufi’s book.

Share this:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)
  • Click to print (Opens in new window)
  • Click to email a link to a friend (Opens in new window)

© Copyright 2023 Coherent Research Institute · All Rights Reserved