Arnold Kling  

Christina Romer on the Great Depression and Now

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She writes,


though the current recession is unquestionably severe, it pales in comparison with what our parents and grandparents experienced in the 1930s. Last Friday's employment report showed that unemployment in the United States has reached 8.1%--a terrible number that signifies a devastating tragedy for millions of American families. But, at its worst, unemployment in the 1930s reached nearly 25%. And, that quarter of American workers had painfully few of the social safety nets that today help families maintain at least the essentials of life during unemployment. Likewise, following last month's revision of the GDP statistics, we know that real GDP has declined almost 2% from its peak. But, between the peak in 1929 and the trough of the great Depression in 1933, real GDP fell over 25%.

She says much more that is of interest. Thanks to Greg Mankiw for the pointer.


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CATEGORIES: Macroeconomics



COMMENTS (8 to date)
Bob Murphy writes:

In particular I found her point about FDR's tame deficit spending to be of interest. You wouldn't know it from her speech, but Herbert Hoover was more than twice the Keynesian under Romer's own criterion. I explain below for those interested (and for those not interested as well):
http://consultingbyrpm.com/blog/2009/03/romer-adds-to-near-lying-about-hoover.html

8 writes:

1931 was the "Tragic Year", not 1929 or 1930. The Obama adminstration is going to have no credibility if things turn south.

Zac writes:

If our economy was strong and steady and we were talking about a recession that happened decades ago, comparable to what we're going through now, I'd understand her comments and agree that the comparisons with the Great Depression are way overblown. But until we've "bottomed out" - any comments on how bad things are, or aren't, this time around are premature.

kebko writes:

I agree with your logic, Zac. But, the problem is that every recession in my lifetime has been "the worst since the Great Depression" while we were in it, and then, in hindsight, was nowhere near the Great Depression. So, the conversations that are happening when they could actually be relevant are inevitably off-base.

Niccolo writes:

To Arnold and most other economists,


Using rates of unemployment counted today with rates of unemployment counted in the 1930's is really misleading - the two are not looking to be anywhere close because unemployment was measured differently in the 1930's.


In all actuality, by using the U6 measuremenat, unemployment is about 14 - 15% right now.

Look, I'm not saying that the global economy is as bad as it was during the 1930's - I doubt it ever could get worse than where it was seeing as we are in the future now and just about any century would be a better time to live in than a past century would have. I am saying, however, that what we need is a little honesty here. Don't spit on the cupcake and tell us its frosting. Unemployment is a tricky number, an unreliable statistic, and it changes through the years.


Are things great depression bad? I don't think so, but I'm open to being wrong. Still, they seem a lot worse than what many economists are trying to paint it as for the mere purposes of not looking like a bunch of eeyores.

Patrick writes:

I'd also really like to hear an answer to Niccolo's question on the unemployment rate. I have tried to find precise explanations of how unemployment was calculated in the depression, but I haven't found much of value. The best I found was some government historical data that claimed to "account" for the differences, but I was clearly unconvinced. Arnold, I would appreciate if you could touch on this!

Amanda0970 writes:

I agree w/ Ms. Romer. The economy experiences peaks and recessions on a daily basis, however small, and I truly believe with my whole being that the only reason this recession has gone as far as it has is because of the media forecasting doom. The public got scared, and we dug ourselves a huge hole. If we live our lives and let go of the worry as much as we can, and simply find ways to feed our families, the issues will take care of themselves.

To get on another one of my mini-soapboxes, the media really is the evil behind most of our nation's issues. I guarantee you that were we to live in the exact developmental level of society that we do now, but eliminate news broadcasts, newspapers & magazines, and radio news programs, American citizens would have no clue how bad the recession really is. Ignorance is bliss to the general public when it comes to such sensitive and important institutions as the economy.

To paraphrase and annotate the words of a wise economics professor of mine in class one day, "Find something that you love, and do it. Care for your families and live your life. The money will take care of itself. The money will take care of itself." Honestly, we are NOT all going to end up homeless and starving. A recession cannot take away our loved ones, our freedom, or our God, and nothing is lost as lost as those remain.

Joe4712 writes:

Wow... That is just so sweet. But, in all honesty, I believe that Amanda0970 is right: to an extent. I do believe that this recession has received far too much hype from the media. And I also believe that this recession is nowhere near previous ones (Simply take a look at the statistics at this page: http://www.bls.gov/opub/ils/pdf/opbils53.pdf). However, the media is not the only -- or even the main -- guilty party.

To quote the great Agent K, "People are dumb, panicky, dangerous animals..." The Salem Witch Trials happened without a national media; France's "Great Fear of 1789" came long before worldwide news; Chicken Little didn't need a tv to get his message out. People spread rumors. People panic. To find the true guilty party, look in the mirror (and yes, I realize that phrase is a cliche).

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