Bernanke-Summers versus Post Keynesians

The mainstream neoclassical economists Ben Bernanke and Larry Summers have been debating the issue of why the recovery from the Great Recession has been slow. Ben Bernanke invokes the “savings glut” explanation while Larry Summers supports the secular stagnation of investment argument. Both explanations rely on the loanable funds model, which was thrown aside by Keynes and continues to be rejected by Post Keynesians.

Both Lars P. Syll and Steve Keen have analysed these debates from the Post Keynesian perspective:

Lars P. Syll, “The Bernanke-Summers Imbroglio,” 10 April, 2015.

Steve Keen, “Bernanke-Summers Debate II: Savings Glut, Investment Shortfall, Or Monty Python?,” Forbes, 7th April, 2015.

Steve Keen has a further post on this subject that has yet to appear, but it is clear that his explanation will point to the importance of credit, debt and over-indebtedness.

As well as the problems with loanable funds and the problems with private debt, mainstream neoclassical economists would also do better to look at the recent evidence on how weak is the effect of interest rates on investment decisions today.