Sunday, June 10, 2012

Economic Pessimism in Historical Perspective

US industrial production (log scale), 1790-2011:
From Davis, QJE 2004 (1790-1915); Miron and Romer, JEH 1990 (1916-1918); Federal Reserve, 1919-2011.

J.M. Keynes (Economic Possibilities for Our Grandchildren, 1930):
The prevailing world depression, the enormous anomaly of unemployment in a world full of wants, the disastrous mistakes we have made, blind us to what is going on under the surface - to the true interpretation of things.  For I predict that both of the two opposed errors of pessimism which now make so much noise in the world will be proved wrong in our own time - the pessimism of the revolutionaries who think that things are so bad that nothing can save us but violent change, and the pessimism of the reactionaries who consider the balance of our economic and social life so precarious that we must risk no experiments.


The Arthurian said...

Keynes is wonderful.

Anonymous said...

History does not begin in 1790. If you drew a graph from 3500 BC to now, you would see a huge anomaly beginning in th 17th or 18th century after 5000 years of relatively steady growth. The issue is that we actually live in a materially finite world - there is only so much matter and energy available to us on the surface of this planet. Anyone who thinks we can continue this sort of exponential growth for ever on now either thinks we will start consuming the rest of the solar system and then the galaxy sooner than expected, or is insane.

Bill C said...

Yes, Keynes is one of the most insightful commentators on the contemporary economic situation.

True, there's an implicit argument by extrapolation there... I'm not expecting technological progress and capital accumulation to stop anytime soon, but I could be wrong.