The concern that an economy could experience persistent, and in some sense unusual, weakness goes back to Keynes’s General Theory and led Alvin Hansen to coin the term “secular stagnation.”
In the postwar development of macroeconomics, this perspective was not completely lost, but it became a backwater in the mainstream. This paper argues that it was a mistake to dismiss secular demand stagnation as a potentially important problem in modern developed economies. We argue that the theoretical case for possible secular stagnation remains strong and empirical evidence that it has affected the U.S. economy in the aftermath of the Great Recession is convincing.
