Amar Bhide, WSJ Edit Page, Embrace Regular Recurrence of Massive Recessions

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In 1929, a recession began that lasted 43 months followed by several years of recovery and then a new 13 month recession in 1937-38. Collectively, that period is known as the “Great Depression.” Between the end of that episode and the beginning of our current troubles, the National Bureau of Economic Research has identified eleven additional recessions, the longest of which (in the mid-seventies and in the early-eighties) lasted 16 months each. NBER doesn’t have data for the first half of the nineteenth century, but in the second half of the nineteenth century there were eleven recessions of which fully seven were longer-lasting than any of our post-Depression recessions.

In other words—bad times:


But something about the current political situation appears to have driven a swathe of the right completely insane.* Thus we get Amar Bhide writing things about how “The depressions and panics of the 19th century ended without any fiscal stimulus to speak of” so there’s no reason to waste our time with “John Maynard Keynes’s speculative conjecture about human nature.”

Now to be clear, it’s not the case that Keynesian theory says that absent government intervention a depression will never end. Rather, Keynesian theory says that absent intervention recessions will be long and everything will be terrible while admitting that they eventually end. This is the part where the thing about how in the long run we’ll all be dead creeps into the picture. Eventually, the recession will end even if we don’t do anything, but this is no comfort to actual people trying to live finite human lives on the planet earth.

Note in particular the so-called “Long Depression” set off by the Panic of 1873. This was a five year, two month recession followed by a 34 month expansion followed by a new 38 month contraction. In other words, we had an eleven plus year span during which the economy was contracting over 75 percent of the time. That’s no good. And in addition to the direct economic harms of that sort of thing, you can have some very nasty political consequences in these situations. But that’s the world of passivity in the face of economic calamity.

* I mean it. How hard would it be for a conservative- or libertarian-inclined economist to just say “the idea of a fiscal stimulus makes some sense, insofar as it’s attempted my preference would be to work as much as possible through tax side measures lest a ‘temporary’ stimulus become a permanent expansion in the size of government”? That’s totally coherent. Instead we’re getting nutty resurrections of the Treasury View, people downplaying the catastrophic nature of the 19th century business cycle, Alan Reynolds, bizarre revisionism about the New Deal, etc.