40 Pages Posted: 7 Mar 2011 Last revised: 22 Dec 2012
Date Written: March 1, 2011
The intellectual and practical response to the worldwide crisis of 2007-2009 has exposed the poverty of prevailing ideas about how economies work and fail. The transformative opportunity presented by the crisis has largely been squandered; but the opportunity for insight has not. Insight today can support transformation tomorrow.
The present debate about the crisis and the subsequent slump has largely suppressed two themes of major importance. The first theme is the relation of finance to the productive agenda of society. The second theme is the link between redistribution and recovery. A pseudo-democratization of credit has been made to do the work of redistribution. Yet the most important form of redistribution is not retrospective and compensatory; it is the reshaping of economic and educational arrangements to broaden opportunity and enhance capabilities.
Fiscal and monetary stimulus is rarely enough to redress the effects of a major economic crisis. The proper role of a stimulus is to play for time by preventing the aggravation of crisis and prefiguring a program of recovery and reconstruction.
The vulgar Keynesianism embraced by many contemporary progressives fails to offer a theoretical guide to such a program of recovery. However, the fault does not lie solely in the vulgarized version of Keynes’s ideas; it lies in the ideas themselves and in the whole mainstream of economic analysis that grew out of the marginalist revolution. Law and legal thought are integral to the theoretical alternative explored in this essay, because they provide the institutional imagination with indispensable equipment.
This essay takes a first step in the effort to develop an intellectual alternative. It does so by outlining an approach to our present problems of crisis, slump, and recovery.
Suggested Citation: Suggested Citation
Lothian, Tamara and Mangabeira Unger, Roberto, Crisis, Slump, Superstition and Recovery: Thinking and Acting Beyond Vulgar Keynesianism (March 1, 2011). Columbia Law and Economics Working Paper No. 394. Available at SSRN: https://ssrn.com/abstract=1780454 or http://dx.doi.org/10.2139/ssrn.1780454