What Have We Learnt?
Edited by Steven Kates
Chapter 12: Human Resources: The Key to Institutional Economics after the Great Recession
Charles J. Whalen INTRODUCTION In the wake of the recent global financial crisis, many economists have asked what went wrong, how can economists do a better job of anticipating or preventing financial trouble in the future, and how can economic theory better incorporate financial institutions into macroeconomics? Addressing those questions is appropriate, and this author has even led one inquiry of that sort (Whalen, 2011). But learning from the global financial crisis and what has become widely known in the USA as the Great Recession must involve more than recognizing what can go wrong. It must also involve learning as the crisis winds down and as the economy moves into the recovery phase and then into the next expansion. If, as is almost certain, the jobs that will be required in that expansion will be different and often even in different places from where they were before, then unless we take these issues into account we will not have properly or fully addressed the recession problem. This chapter leaves a retrospective analysis of the downturn to others and instead takes an institutional economist’s perspective on what we can learn from how the crisis was brought to a close. From an institutionalist perspective, resolving the Great Recession required a two-pronged strategy: recovery and reform. The recovery agenda included monetary stimulus and expansionary fiscal policy to stabilize aggregate demand, Federal Reserve (Fed) ‘lender-of-last-resort’ action to stabilize financial markets, and temporary financial market policies to address dimensions of the Great Recession that required...
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