As if nothing were going to happen: a search in vain for warnings about the current crisis in economic journals with the highest impact factors

The first issue we shall deal with in our paper refers to how aware mainstream economists were as regards the possibility of a crisis comparable to the current one. With this purpose in mind, we conduct a thorough analysis of the articles published over recent years by the most qualified economic journals, and particularly by those with the highest impact factors. As is well known, these journals publish almost exclusively mainstream economists’ papers and are therefore the most suitable source to analyse the views of the orthodox theory on the possibility of a crisis like the one underway. This analysis brings to light a considerable lack of contributions indicating the existence of such a possibility. This result gives rise to a second question. What features of mainstream theory prevented ongoing trends from being understood? One way to deal with this issue is to analyse heterodox contributions in which the possibility of the crisis was indeed envisaged. The contributions we have analysed focus on the increasing levels of household indebtedness, viewed as the means to neutralize the negative impact on consumption of the marked changes in income distribution and increasing social inequalities. In this context, financial deregulation and cheap money are interpreted as the permissive factors of a process of substitution of loans for wages, which brought low wages to coexist with relatively high levels of aggregate demand. The crisis is thus viewed as the outcome of the eventual non sustainability of the rising household debt, hence of this process of substitution of loans for wages. In our view, therefore, the causes of mainstream economists’ difficulty to envisage the crisis must be sought in their nearly unanimous agreement with major aspects of the pre-Keynesian way of reasoning, and especially with the idea that the economy’s actual output tends to adapt to potential output, and that employment and output levels cannot be constrained by demand.