April 6, 2009

An advertisement for history

My thanks to the indefatigable Paul Krugman, who writes soberly about how close we came and may still be to a repeat of the 1930s:

[K]nowledge is the only thing standing between us and Great Depression 2.0. It's only to the extent that we understand these things a bit better than our grandfathers--and that we act on that knowledge--that we have any real reason to think this time will be better.

I am not an economic historian, but it strikes me that if we get out of the current mess with a minimum of pain, it will be due to government stimulus, fast action by the Fed (and other central banks, though Bernanke is clearly going far beyond other central bankers) to increase the money supply, and plain luck. I'll take the luck right now, but the other stuff is policy and is informed by serious understanding of the Great Depression. Bernanke comes from the monetarist side of the economic house, while Krugman, DeLong, and others come from the firmly Keynesian side, but there can be no doubt that Bernanke's aggressiveness is informed by his own thinking about economic history, as Krugman's and others is informed by their own.

Let's just hope that their understanding of economic history from the late 1920s and early 1930s is a little less urgently needed in a year or so.

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Posted in History on April 6, 2009 9:22 PM |