This interview originally appeared at The Browser.
The lessons of the Great Depression is our theme today. You
are an expert on that topic. By all accounts, that’s one of the reasons
why Barack Obama asked you to join his cabinet in the autumn of 2008.
How well did economists understand the toll that the financial crisis of
2008 would take on the US economy as you prepared to chair the White
House Council of Economic Advisers?
In the middle of the financial crisis, it was hard to estimate just
how much damage had already been done to the economy and how widespread
the impacts would be. But what economists certainly understood from
history was that the crisis could be absolutely devastating if
policymakers didn’t take steps to stop it and to mitigate the damage.
Right-wing websites are rife with references to “Obama’s
Depression”. I know economists and partisan bloggers wield the word
“depression” differently. When economists use the word, what precisely
do they mean?
The word “depression” doesn't really have a well-defined meaning,
unlike the words “recession” and “expansion”. The National Bureau of
Economic Research defines a recession, for example, as a time when
economic activity is declining. Often what economists mean by depression
is the same thing other people mean – a really bad and exceptionally
prolonged recession. Importantly, as bad as the current recession has
been, it has been far less severe and prolonged than the episode we all
agree was a depression, the Great Depression of the 1930s. To give you one indicator, in 2009 the US unemployment rate peaked at 10%. In the early 1930s it hit 25%.
Read more: http://thebrowser.com/interviews/christina-romer-on-learning-great-depression?page=full#ixzz1n4g0iIuV
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