Larry Summers: prediction

Transcript context

…If there’s an ongoing demand shortfall, as is suggested by many secular stagnation approaches, does that mean monopoly cannot be a major economic problem because that’s from the supply side, and that the supply side constraint isn’t really binding if you think of there as being multiple Lagrangians. Forgive me for getting technical for a moment. Do you see what I’m saying? That wouldn’t have been the way I’d have thought about it, Tyler, but what you’re saying might be right. I think I’d be inclined to say that, if there’s more monopoly, there’s more money going to monopoly firms where there’s a low propensity to spend it, both because the firms don’t invest and because the owners of the firms tend to be rich or endowments that have a low propensity to spend. So the greater monopoly power, to the extent that it exists, is one factor operating to raise savings and reduce investment which contributes to demand shortfalls and secular stagnation. I also think that there’s likely to be less entry in competition in markets that aren’t growing rapidly than there is in markets that are growing rapidly. There’s a sense in which less demand over time creates its own lack of supply. Let me ask you a deliberately too naive question. That is, don’t wealthy people invest almost all of their money, and thus, why is that an aggregate demand shortfall?…

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