Believe those who are seeking the truth. Doubt those who find it. Andre Gide

Sunday, September 26, 2010

Recession, Fed Policy, and Locusts

George Selgin is renowned for his work in monetary theory and history, so when he speaks, he deserves to be listened to: Recession, Fed Policy, and Locusts. (I thank one of my blog visitors for drawing my attention to this article).

I have only a quibble to offer. Selgin remarks that the unemployment rate in the 1870s depression never exceeded 8%. My hunch is that a given rate of unemployment 100 years ago would have imposed much more economic hardship than an identical rate today. (In particular, people are wealthier today, making unemployment more affordable). Also, I am wondering whether the numbers are strictly comparable? I presume that conventions of today's Labor Force Survey were not in place back then. Does anybody out there know?


  1. Hello again, DA... Blog looks good.
    Interesting link. I was going to say it is unreasonable to compare a weather-related slump to our recent slump, but Selgin made the point for me:

    "...wasn’t Mother Nature but unsound monetary and financial-system policies that got us into the most recent recession."

    I also liked this:

    "The bad news is that it’s far from clear that Fed and Treasury actions so far have penetrated to the roots of our financial ills, and that whatever’s been eating today’s economy isn’t just going to fly away."

    98.6% of economics on the internet is either complaining about the problems, or offering unfounded solutions. Seems to me the most important thing would be to ascertain the root or underlying cause of the problem.

    I would have Selgin repeat a phrase: whatever’s been eating today’s economy isn’t just going to fly away.

    He sounds unsure of the root.


  2. David,

    I've done a little hunting around, specifically on and the NBER historical databases - no straight-up employment numbers for the period as yet.

    I agree with your quibble. It's important to understand if George's unemployment rate includes farm as well as non-farm. At a time like the 1870s, the rural community was much larger. I would think most would be family farms, at least in the midwest, where the pestilence was.

  3. My pre-Fed unemployment info is from John Vernon, “Unemployment Rates in Postbellum America, 1869-1899.” Journal of Macroeconomics 16(4) (Autumn): 701-14.

  4. Oh, fine. My library's online subscription to Journal of Macro only goes back to 1997. Now I have to do legwork!

    But thanks for the reference.