by Robert J. Shiller in the NY Times:
THE United States and other advanced economies may be facing a long, slow period of disappointing growth.
That is a widespread concern, as recent polls demonstrate. A USA Today/Gallup poll, for example, found this month that about two-thirds of Americans say they think that economic recovery won’t start for two more years, while 28 percent say it won’t begin for at least five years.
Among students of history, there are fears that we will suffer the type of chronic economic malaise that afflicted the world after the 1929 stock market crash, or that weakened Japan after the puncturing of twin stock and housing market bubbles around 1990. The post-1929 depression did not end for about a decade, and Japan has still not emerged from its post-1990 slowdown.
The fears themselves are an integral part of the problem. Economists have a tendency to assume that everyone’s behavior is rational. But post-boom pessimism is a factor driving the economy, and it is likely to be associated with attitudes that may be enduring.
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