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.”