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Author: Will Wilkinson

Vice President for Research at the Niskanen Center

21 thoughts

  1. This is an exceedingly strange way of looking at things. What people fear about a depression isn’t that it will mean the end of economic growth for all time. A decade of hard times is more than terrifying enough on its own. I don’t suspect that many people will be comforted by the knowledge that the economy will eventually recover.

  2. I too have no worries about our long term prosperity – for me as a family man and for the nation as a whole, but it’d be damned inconvenient for me to lose my job right now. I’ve been through enough in my life to know that losing a job – even losing a house – isn’t the end of the world, but I’d like consistency in my life for the sake of my family. Yes, the Republic Will Survive, but I’d like to ensure I can make the mortgage for the next 10 years too.

  3. How about an even longer-term view – say, from 1492 to today, with projections through the year 3000? Why start in 1820? By the way, if you cut out the portion of the graph from 1933 to 1945, you would see the triumphal march of progress and prosperity in the FDR years graphically illustrated.

  4. Both of the previous comments are right – it’s very difficult to deal with bad times, and nobody wants to go through them.
    Having said that, I think the post is very valuable. Listening to the pundits right now, one would think that the world is about to end, that this is a crisis of historic proportions from which we won’t ever recover, and that only (fill in the blank here) can avert catastrophe.
    The reality is somewhat different, and it’s good to point that out now and then to help maintain perspective.

    1. Starvation? That would HAVE to be a pretty small number. In fact, I’ve never even heard anyone claim anyone starved during the depression, outside of the book version of “The Grapes of Wrath” which isn’t exactly a documentary. If you have a link, please share, as I’m curious. Now if you want to talk ~famine~, look at the Ukraine during the 20’s and 30’s. Those poor people…

  5. By the way … it occurs to me that our political class argues about whether to cut Social Security benefits and raise the retirement age … rather than pay us what they promised us when they took our tax money for this program.
    Yet, when the butcher’s bill comes due for the gamblers on Wall Street, it’s an immediate $700 billion payment directly to yacht owners like Dick Fuld and his tribe of moneymen.
    So, let’s all remember who our enemies are.

  6. While accepting the post’s data and expectations, I note that Messrs. Wilkinson and Clemens seem to be under 40.
    Keynes’s comment about the long run grows ever more cogent to me…

  7. If you’re 40, you can expect to live about 35 more years. If you’re 50, you can expect to live about 30 more. If you’re 60, you can expect to live a bit more than 20 more. That’s a pretty good amount of long run for most everybody!

  8. Today my toddler son was crying because he slipped over when he was pulling himself up. I remarked to my wife that we as adults must look the same way during many times during our adult life.
    There are some awful things in the world – but next to the Holodomor or the Holocaust or World War II, this burp in the markets is nothing.
    Given today’s level of knowledge and capabilities for deep analysis, I suspect that the slowdown is short-lived as people isolate then route around the fault.
    The danger lies in overreaction by politicians – and given the supergeniuses we have, its a possibility.

  9. “I suspect that the slowdown is short-lived as people isolate then route around the fault.”
    How do you re-route around politicians who demand that my bank loan my deposit to illegal aliens for zero-down home loans with no income or citizenship verification, as a means of vote buying?
    Every foreclosure of THEIR house lowers the value of MY HOUSE. They, in other words, are stealing my equity right out from fking under me.
    How do I reroute around that, short of a revolution?

  10. The thing that struck me about that graph was how much more short-term volatility it shows after about 1890. Is that an artifact caused by more limited data from the earlier period, or does it reflect some actual change in the economy?

    1. I gues it’s an artifact. The business cycle has actually become LESS volatile since the 80s. That’s the change in the economy no one can explain.

  11. “The Great Depression was traumatic in countless ways, but astonishingly, it’s not clear that we are any worse off today than we would be if the whole thing never occurred. Anyone who made such a claim in the 1930s would have been scoffed at, but that’s what happened.”
    Yes, but the reason the economy was able to recover so quickly after the Depression is because the whole world went to war. If someone in the 1930s had claimed that per capita GDP would be back on track by 1950, but only because the economy would be spurred by five years of worldwide, total war (entailing the slaughter of innocent millions and the physical destruction of most of Europe and Japan), would that person have been scoffed at?
    My point is, not all costs are strictly economic, and so not all costs can be captured in a chart such as this one. It very well could be that in little more than a decade, GDP will be back on track. But if that only happens because of economic growth resulting from the very political instability caused by the worldwide recession, is it really much of a win? It’s like: maybe my portfolio/career is back on solid ground thanks to the booming wartime economy of the last decade, but maybe it’s also true that my son was killed or injured in that war.
    Am I way off the mark here?

  12. David, yes you are off the mark. Wars destroy value, big big time. They create some new technologies in a hurry, but the sheer destruction is many times worse. Economic growth doesn’t happen because of political instability, but despite it. The underlying growth, which is the sum of learning of individuals and society, just keeps on.
    Of course, bad times are bad times, even if good times are sure to happen again. It should help, though, to know that the bad times are not permanent, as some describe it.
    Another point is that recessions keep getting lighter and lighter, not worse. It is virtually guaranteed that in the coming recession, people on average will still be better off than even in the “heyday” under Clinton, because the economic growth that has happened in the meantime, and which cannot be undone.

  13. Beautiful: Now can calculate how much my 30gb ipod is worth in 1810 dollars.
    In other words, the smoothness of the graph may be an artifact of the way that the CPI is calculated across changes in the basket of consumption goods. The right CPI is the one that keeps the trend going.

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