Accumulation and Secular Stagnation: Part II, Application

  • Daniel Aronoff


In the last chapter I articulated a theory that relates Accumulation to secular stagnation and employment volatility. In this chapter I explain that foreign mercantilists and people who spend below their income during their lifetime are Accumulators. In so doing, I argue that Accumulation is the ultimate force behind the disruption caused by the capital flow bonanza and the pattern of below trend growth and employment punctuated by booms that the US economy had been subjected to since the late 1990s. Finally, I resolve the mystery of the “dog that didn’t bark.”


Interest Rate Institutional Investor Excess Demand Income Share Current Account Deficit 


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  1. 4.
    Adam Smith, The Wealth of Nations Modern Library Edition (Random House Inc., 1994), p. 466.Google Scholar
  2. 5.
    Ibid., p. 456.Google Scholar
  3. 6.
    Ibid., p. 468.Google Scholar
  4. 7.
    Ibid., p. 715.Google Scholar
  5. 14.
    Milton Friedman, A Theory of the Consumption Function (Princeton University Press, 2008 [1957]).Google Scholar
  6. 15.
    See Albert Ando and Franco Modigliani, “The ‘Life-Cycle’ Hypothesis of Saving: Aggregate Implications and Tests,” American Economic Review, Vol. 53, Number 1 (1963): 55–84.Google Scholar
  7. 19.
    As was discussed in chapter 9, a central insight of Keynes is precisely that decentralized markets, where savers and investors are separated, sometimes do not “work out” that saving implies future demand. When that happens, according to Keynes, deficient demand causes income to decline until saving has shrunk to a volume that equals investment. That was Keynes’s seminal refutation of Say’s Law. I shall take a related, but slightly different tack in this chapter. The underlying logic of my point is rooted in Keynes. See Axel Leijonhufvud, “The Wicksell Connection: Variations on a Theme,” in Information and Coordination (Oxford University Press, 1981), pp. 131–203, and the discussion in chapter 9.Google Scholar
  8. 25.
    See Orazio Attanasio, Erik Hurst, and Luigi Pistaferri, “The Evolution of Income, Consumption, and Leisure Inequality in the US, 1980–2010,” National Bureau of Economic Research Working Paper No. 17982, 2012.CrossRefGoogle Scholar
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    Alvin H. Hansen, “Economic Progress and Declining Population Growth,” American Economic Review, Vol. XXIX, Number 1, Part 1 (1939): 1–15.Google Scholar
  10. 40.
    See Ricardo J. Caballero and Emmanuel Farhi, “On the Role of Safe Asset Shortages in Secular Stagnation,” in Secular Stagnation: Facts, Causes and Cures (London, UK: CEPR Press, 2014), Chapter 9, pp. 111–123; and Ricardo J. Caballero and Emmanuel Farhi, “The Safety Trap,” NBER Working Paper No. 19927, 2014.Google Scholar

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© Daniel Aronoff 2016

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  • Daniel Aronoff

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