Secular stagnation and post-scarcity

By Marco Nappolini – In a post-scarcity economy the expected risk-adjusted return on investment is already sharply reduced in competitive markets as profits are brought down closer to marginal cost. The only way to extract significant profit is either through increasing scale or (related) anti-competitive practices.

The combination of asset bubbles and low profit margins make the system more vulnerable to cyclical crises. In response to an expected fall in demand firms quickly cut employment and investment, which helps to maintain or even increase profit margins in the near term. But as Krugman and Eggertsson have pointed out what might make sense for an individual or a single company becomes disastrous over the economy as a whole. more>



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