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by | Jan 28, 2016 | Uncategorized

Has the world entered a period in which economies simply won’t grow at the rate they once did? Radical as the thought may seem, it might not be radical enough.

A few years ago, the economist Larry Summers stirred much debate when he suggested that the anemic growth of recent years might not be just a temporary affliction, and might have little to do with the 2008 financial crisis. Instead, he surmised, it could reflect secular stagnation — a new normal of low consumption and lagging growth stemming from accumulated household debts and rising inequality, among other factors. In different terms, considering the impacts of technological innovations, economist Robert Gordon has been arguing for much the same conclusion.

For two decades now, a lesser-known group of mostly German economists has been making a more extreme argument: that the standard model of exponential growth — in which an economy can be expected to expand by a given percent every year, no matter how big it gets — is fundamentally flawed. Rather, these economists claim that while exponential growth fits some young economies, mature economies tend, as a rule, to grow much more slowly — in a linear way, meaning that the percentage growth rate would constantly decline.




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