Monday, May 11, 2009

This Is Not Another Great Depression

The nice thing about being an economist is that you have numbers to tell you about history, so you don't have to rely only on people's subjective impressions.

"Since the start of the recession in late 2007, the monthly unemployment rate has risen from 4.9 percent to 7.6 percent in January 2009. Before thinking about the Great Depression, realize that unemployment rates have exceeded 7 percent in 139 months since World War II. This includes 32 months between 1974 and 1977, 76 months between 1980 and 1986, and 21 more between 1991 and 1993. The Great Depression was far more disastrous. One year after the stock market crash of 1929, the unemployment rate had risen from 2 percent to 10.8 percent. The next year it was 16.8 percent. Then unemployment rates rose above 20 percent for four straight years! "

from Freakonomics

It is also important to note that most households in the 30's relied on a single income, and that there were almost no social welfare systems, which means that about one fifth of all Americans basically had no means of support.  Nowadays, unemployment usually means that a household goes from two incomes to one income plus government benefits.

So from an objective standpoint, the pain today is nothing like it was back then.

Of course, any philosopher or biologist will tell you than pain is an entirely subjective experience.  It may well be true that the amount of pain and suffering that people are experiencing today is as great as it was back in the 30's.  People used to be a lot tougher.

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