Naked Economics: Undressing the Dismal Science pdfdrive com

Total national happiness. You decide. We don’t have a number for that one yet.
An autoworker in Detroit who has spent his career getting laid off for months at
a time and then called back to work is going to ask a simple question: Are we
getting any better at all of this? Yes, we are. The United States has gone through
eleven recessions since World War II.
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None, including the recession that began
in 2007, is even of the same order of magnitude as the Great Depression. From
1929 to 1933, real GDP fell by 30 percent while unemployment climbed from 3
percent to 25 percent. Prior to the Great Depression, the United States regularly
experienced deep recessions, including financial panics, far worse than what
we’re going through now.
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We haven’t made the economic bumps go away, but
they are smaller bumps.
One can also argue that what we’ve learned from past economic downturns,
and the Great Depression in particular, has helped with policies this time around.
Fed chairman (and former Princeton professor) Ben Bernanke is a scholar of the
Great Depression. So is Obama’s chair of the Council of Economic Advisers
(and former UC Berkeley professor) Christina Romer. I can promise you that
economists will still be arguing fifty years from now about what should or
shouldn’t have been done in response to the recession and subsequent financial
crisis. However, even the toughest critics should concede that officials at the end
of the Bush administration and the beginning of the Obama administration
avoided the worst mistakes of the 1930s, when the Federal Reserve raised
interest rates in the face of the Great Depression and Congress raised taxes—
thrusting both monetary and fiscal policy in the wrong direction.

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There is something to be said for not doing exactly the wrong thing. I suspect
history will judge that policymakers did even better than that.

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