CFR had a symposium on Great Depression learnings. Just check out the papers on GD from all top econs – Lucas, Bordo, Prescott, Ohanian, Cole etc. You name it and they have it. (Just move the mouse around the titles as links are not clearly visible; some are free and some are not). Apart from papers they have videos and transcripts of each session.
I was reading this sessionwith Lucas. He compares the two events by looking at GDP below the trend. In GD it fell by 34% in 4 years making it all the more difficult to recover. In this crisis it is expected to be around 8-10% enabling a faster recovery. The broad idea is:
The trend growth rate of the U.S. economy is 3 percent per year — I’m talking about total GDP, real GDP. And we always — we keep returning to it, it’s been our — the norm for well over a century. But, suppose right this minute GDP is 6 percent below the trend line? Then to recover in three years, to get out of a recession in three years, we need three years of 5 percent growth — 3 percentage points just to keep up with the trend; and 2 percent, three times in a row, to get, to make up for the 6 shortfall. So, that’s what it means to get out of a recession like this, roughly speaking.
His take on fiscal multiplier:
The Moody’s model that Christina Romer — here’s what I think happened. It’s her first day on the job and somebody says, you’ve got to come up with a solution to this — in defense of this fiscal stimulus, which no one told her what it was going to be, and have it by Monday morning.
So she scrambled and came up with these multipliers and now they’re kind of — I don’t know. So I don’t think anyone really believes. These models have never been discussed or debated in a way that that say — Ellen McGrattan was talking about the way economists use models this morning. These are kind of schlock economics.
Maybe there is some multiplier out there that we could measure well but that’s not what that paper does. I think it’s a very naked rationalization for policies that were already, you know, decided on for other reasons. I don’t — I’d like to talk about the Lucas critique but I don’t — I don’t think we can — (chuckles) — deal with that issue.
Interesting throughout. We are in the middle of one of the worst crisis ever and still discussions over basics of economics continues. I am amazed to see how much bickering there is between economists wrt to measures for tackling crisis.
(IMF also had a conference on near similar topic).