David F. Ruccio — Inequality and the current crises

Mainstream economists (like Brad DeLong) can’t seem to find any connections between growing inequality and the current crises. But it’s not a problem for Federal Reserve Board Governor Sarah Bloom Raskin.

Yes, this is the same Raskin who recently decided to look beyond capitalism for a solution to the current crises. In an extension of those remarks, she set out to examine how “economic marginalization and financial vulnerability, associated with stagnant wages and rising inequality, contributed to the run-up to the financial crisis and how such marginalization and vulnerability could be relevant in the current recovery.”

Here’s her argument in a nutshell:

The representative agent assumed in neoclassical equilibrium modeling ignores the complexity of relevant conditions, like worker income that affects aggregate demand. You know, like we've been saying.

Real-World Economics Review Blog
Inequality and the current crises
David F. Ruccio | Professor of Economics, Notre Dame