To Robert Samuelson it´s in our minds:
We have gone from being an expansive, risk-taking society to a skittish, risk-averse one. Before the 2008-09 financial crisis, the bias was toward more spending.
In criticizing Samuelson´s ‘psychological’ take, Dean Baker concludes:
In short, the story of the downturn remains depressingly simple. We have nothing to replace the huge amount of construction and consumption demand created by the $8 trillion housing bubble. Perhaps if the problem were more complicated policy types would have an easier time seeing it.
Dean Baker is wrong. The ‘”simplicity” of the story lies elsewhere. The charts indicate that it was only AFTER nominal spending first faltered and then dropped off a big cliff that consumption, nonresidential investment and overall employment followed suit. Construction tanked long before, without causing any measurable grief. Why? Because the Fed kept NGDP chugging along close to trend.
In fact, Robert Samuelson´s ‘psychological’ reason is also nothing more than a case of ‘missing spending’!