Publication

This brief argues that economists and policy makers were not prepared for the financial crisis of 2008-09 because they were applying what they thought should have been the solution to the 1970s crisis, which was of a different type. In particular, the author argues that in the 1970s policy makers saw the decline in output as a problem of demand rather than supply and instituted the inappropriate policies. In the 2008-2009 crisis, the problem was with demand rather than supply, but that policy makers brought in measures to deal with a supply shock.