Tyler Cowen puts Keynesian, monetarist, real business cycle, and Austrian theories to work to explain a downturn from recent economic history: the Great Recession of 2008.
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The Great Recession was a period of economic downturn that began in 2008 and lasted for several years. It was the most severe economic crisis since the Great Depression of the 1930s and had far-reaching effects on the global economy. The Game of Theories surrounding the Great Recession involves various mechanisms and factors that contributed to the crisis.
One of the main theories suggests that the Great Recession was caused by the housing market bubble. In the years leading up to the crisis, there was a rapid increase in housing prices, which encouraged many people to buy homes they could not afford. Banks and financial institutions were also willing to give out loans to people with poor credit ratings, further fueling the housing market growth. As the bubble grew, housing prices became overinflated, and people began defaulting on their mortgages. This ultimately led to a massive crash in the housing market, which had a domino effect on the rest of the economy.
Another Game of Theory surrounding the Great Recession revolves around the global banking system. Many banks and financial institutions pursued risky investment strategies, such as mortgage-backed securities, that generated high returns but were ultimately unstable. These investments were based on the assumption that housing prices would continue to rise indefinitely, but when the bubble burst, the whole financial system was exposed to significant losses. The collapse of Lehman Brothers, one of the world’s largest investment banks, in 2008 was a pivotal moment in the crisis, as it triggered a wave of fear and uncertainty throughout the financial sector.
Some Game of Theories suggest that government policies and regulations played a significant role in the Great Recession. The easy availability of credit, deregulation of financial markets, and lax oversight of the banking industry are some of the factors that contributed to the crisis. Critics argue that the repeal of the Glass-Steagall Act in 1999, which separated commercial and investment banking, paved the way for risky practices and helped create the conditions for the crisis.
The Great Recession had far-reaching effects on the global economy, with unemployment rates spiking, businesses closing down, and governments struggling to cope with the fallout. The Game of Theories surrounding the crisis has fueled intense debate and scrutiny, with experts and analysts continuing to explore the causes and effects of the recession.
In conclusion, the Great Recession was a complex economic crisis that had multiple contributing factors. Game of Theories range from the housing bubble, the global banking system, to government policies and regulations. While the exact cause of the crisis remains subject to debate, its effects are still felt today and have had a significant impact on the global economy.
It seems that the Austrian and Real Business Cycle Theory are looking at the root causes and the monetarists and Keynesians are looking at how to mitigate the problem after its already arisen. The monetarists, and especially the Keynesians, also seem to have too much faith in a non-omniscient government that doesn't at all behave in the idealized way that they wish it would. Overall I found the Austrian school to have the most satisfactorily explanation, even though it's not even a mainstream school.
Hayek was amazing
He said about boom and bust and it did happen in 2008
Now i want to be an economist
Do you guys have a video about this now? Like how the covid crisis compares with the 2008 crisis and how and why the fed is acting like they are acting now?
I loved this video. It was nice to see the business cycle theorists not caricatured.
A way of summarizing: the RBC and the Austrians give the explanation for why the crisis appeared in the first place, thus how he could have avoided it entirely. The monetarists give the explanation of how, despite the situation being bad, things could have been not so worst as it ended up being if only the FED had acted sooner. Finally, once the crisis was already taking shape due to the failures pointed out by the monetarists, the Keynesians bring a solution to how minimize the impact (how the fall of GDP could have been lower), and finally, the Austrians and RBC theory reappears pointing out how the recovery could be faster.
best video
https://www.youtube.com/watch?v=jj8rMwdQf6k&t=2762s
made in 2006 you might think this video was made after the recession
this is the "austrian" school i would rather we start calling then real economics instead but in the mean time
The Austrian explanation is the most comprehensive out of all of them.
I think the fatal flaw of Keynesianism (and I suppose monetarism) is that it conflates currency changing hands with productivity and wealth generation. You can't just pump currency into an economy and expect it to result in wealth being generated as an outcome of this spending.
The Austrian explanation is most accurate
Only the Austrian explanation is a real explanation of both the boom and the recession.
The Keynesian explanation is circular, i.e explaining a recession with a drop in demand is saying nothing really, because the drop in demand is the recession.
Lol, the Nobel Committee got away with this confusion by giving Nobel Prizes to all of them.
I side with the Austrian model. If you keep landing easy money to all people with not enough education and a sense of financial knowledge, they will keep investing money on the things that they heard on the street. In the end all the money will be wasted and the rest of the society will pay their debts…
The Austrians were the most right and the Keynsians were the least. The Austrians look at the disease and cure it, the keynsians and the monetarists just want to treat symptoms endlessly. Too bad their treatments have more negative side effects than positive effects.
Where's the Marxist analysis?
I'd like to know what these professors think about Bill Clinton repealing the Glass-Steagall Act and how that contributed perhaps most significantly to the 2008 financial crisis. It's important to remember that quantitative straining happened long before quantitative easing came into the picture all because of socialists who decided to deregulate the capitalist system for hefty kickbacks.
That said, I'd also like to know what these professors think of Donald J. Trump's idea of using negative interest rates on reserves to flip the script on quantitative easing and repurchase agreements. In effect, changing the bidirectionality through which those things function as expansionary and contractionary tools. I'd like to know all this because I've recently considered a lot of information that the mainstream media doesn't bring to light. I want to know more about how political parties in the United States that oppose Trump can continue to advocate for a quantitative straining approach instead of a quantitative easing approach. Because when interest on reserves is a negative rate, doesn't that flip the way quantitative easing operates around entirely? Of course, right? So, doesn't that mean what people were thinking is quantitative easing has been straining all along in America's context?
In essence, doesn't that mean America has made use of quantitative straining in theory and in practice? In my mind, negative rates of interest on reserves should flip the polarity of open market operations and quantitative 'easing' as contractionary and expansionary policy tools. It's just a thought, but it could very likely be that the socialists who deregulated the Glass-Steagall Act, and the communists who used currency manipulation, were conspiring to steal trillions in social security from America for decades now.
That they've been getting away with it for decades.
If that's true, all those kickbacks paid to double-agents and political insiders to lobby for deregulating free-market property rights, were like bribes to people, undisclosed or materially misstated sources of income, used to siphon trillions into asset protection trusts offshore. I mean, I saw the Clintons' tax returns. How do you earn millions of dollars from one Blind Trust in the Cayman Islands, interest on investment, unless that principal amount is absolutely huge? But that's beside the point of my main question.
All that money owed to America is sitting offshore. How is that the result of quantitative easing? It's not. We all know that.
The professors know it, I'm sure. That offshore money in asset protection trusts that refuse to disclose their interests is also funding custody accounts that provide large sums of equity into a particular political group's media bubble.
We all know that. It's not even a secret anymore, and that's what scares me. That's very troubling to me, especially seeing as wholly foreign-owned enterprises and variable interest entities are benefiting from that stolen money, even today.
The funds that were collateralized without account holders' consent leading up to the crisis was because the investment and commercial banks colluded to bypass credit rating restrictions. The special interest groups who got kickbacks for that betrayed their own country for a quick buck. The sad fact is they got away with it, and now it's taboo to even talk about that?
When a large-scale property fraud was exposed early enough in America to avoid a complete collapse, it still leads to a generational debt spiral, which means something is wrong with the bidirectionality of contractionary and expansionary quantitative easing. That's why negative rates of interest on reserves are needed to flip those two things around.
America's national debt spiral is a sign that those accounts benefiting from the crisis are not being forced to hedge against the same market risk that reduces their profiteering. With a negative rate of interest on reserves, that whole story changes.
Maybe Donald J. Trump isn't as stupid as everyone in the mainstream media is saying?
This is curious, very curious.
The best an introductory series can do is introduce the learner to the different theories. This nails it. MRU is impressive, because it dares to give legitimate attention to theories that are not currently fashionable in most of academia, but theories which nonetheless provide much insight where other theories turn a blind eye, theories which look for causes rather than mere treatment of symptoms.
They are conducting themselves as an ideal professor, encouraging critical analysis of every perspective instead of being a disciple of one and dismissive of the rest.
I can"t stop watching this series, it"s the best about economy
The economy died in 2008, it's been on life support since then with experimental solutions, they will continue until they put this new system together.
I hated economics before, now I LOVE IT. Awesome videos……
These videos are amazing. I love how the theorists characters chip in
I love the Scott Sumner stand-in.
Excellent.
I have never enjoyed learning about Economics, or anything for that matter, as much as I do when I watch these videos from MRU. Thank you very much for the effort.
These videos are extremely well-made. The explanations are so thorough and clear. You two are awesome – thank you, and keep making more Econ videos!!
The color of hayek and kayne should switched
Can we discuss World Economy?!
Comparing the different theories to a specific situation is very interesting (and the character voices keep cracking me up!), but ultimately, you seem to be saying that economists don't really know the answer. You're sort of hoping that you can integrate the various theories to put together a more comprehensive, if still incomplete, answer. But, as you note, the different schools of thought call for different solutions, so they can't all be right, and perhaps not even partially right.
TAXATION IS THEFT
Any video about Marx's crisis theory relevant????
Keynesians feel government spending was constrained? Failed to keep up government share of aggregate demand? Do K's ignore the$831 billion? Brings the saying from Everett Dirkson to mind.
Great video.
great video.