Explaining the Great Recession

Professor Tyler Cowen explains that the Great Recession was the result of a number of different problems. While many economists tend to be dedicated to one particular model of downturns, Prof. Cowen finds evidence that elements from many different models played a factor in the recent recession.

He briefly outlines how the following models could be used to explain, in part, the causes of the Great Recession:

  • Keynesian Business Cycle Theory
  • Real Business Cycle Theory
  • Austrian Business Cycle Theory
  • Monetary Policy

As Prof. Cowen says, “When you have Keynesian, aggregate demand, monetarist, Austrian, real business-cycle theories all pushing in the same direction, first an initial boom and then later a subsequent bust, and the economy has a lot of distinct problems, that’s exactly when you get the biggest messes.”

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