What caused the Great Recession, and could it happen again? These are the questions that motivate Martin Feldstein in the second lecture of his course “American Economic Policy” given to undergraduates at Harvard.
The good professor suggests that the housing sector is where we should look for an answer, and that we should appreciate that public policy played a role in both causing the recession, and in helping the American economy recover from it. But also important policy changes putting this sector on a more stable footing were reversed for political reasons, and this raises the risk that it could all go terribly wrong again.
Where are we? How did we get here? What next?