A Threat to the “American Dream”: Economic and ethical reflections on the Financial Crisis of 2007−2008 and the Subsequent Recession

Wilfried VER EECKE

Department of Philosophy, Georgetown University, Washington D.C. , United States

Grzegorz DĄBKOWSKI

Abstract

I start by summarizing the views of Keynes on recessions and of Schumpeter on economic growth. I then point out that recently some economists have taken a socio−political perspective in looking for causes for the financial crisis and the handling of the recession which followed the financial crisis. Such a socio−political per− spective introduces an ethical dimension in economic thinking. I then connect that ethical dimension of economic thinking to Musgrave’s ethical economic concept of merit goods and my own creation of merit good categories. Next, I contrast the Reinhart/Rogoff view of the financial crisis with the one developed by Reich/Rajan. In my conclusion I then show how the Reich/Rajan approach makes use of seven of my eleven merit good categories to clarify the 2007−2008 financial crisis and the subsequent recession. In doing so I am able to highlight the ethical dimension in the Reich/Rajan analysis of the recent financial crisis and the recession it caused.

Keywords:

recession, economic growth, financial crisis, merit goods, merit good categories, ethical dimension of ethical analyses