Sunday, March 08, 2009

We Need More Depressions

One problem in this crisis is that economics has basically one Great Depression dominating its data. Thus, we are like doctors looking at a patient who is sick, having only one experience with a very sick man. Now, if that man had pneumonia, and the new patient has something else, your cures are going to be no good. Cross country studies are good, but even there we are left with a handful of comparables, and all come with obvious dissimilarities that prevent generalizations. As Russ Roberts says, 'It's one event!'

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