The Superlative Recession and Economic Policies

outlook of political leaders, the media and many economic analysts. The National Bureau of Economic Research, the widely regarded official arbiter of business cycle dates, announced on December 1, 2008 that the economy had peaked or entered a recession in December 2007. Subsequently, comparisons of recent performance and the outlook have degenerated into comparisons with the Great Depression of the 1930s, suggesting that the current recession is the worst since the 1930s. This recession should be called the superlative recession because discussions invariably refer to the most dismal performance since the Great Depression: the decline in stock prices is the worst, the decline in employment is the worst, the fall in output is the worst, the rise in the unemployment rate is the worst, the banking system crisis is the worst, or any number of other “worsts ” since the depression. These superlative comparisons are far off base. But more importantly, the superlatives seem to have succeeded in reversing 70 years of history on economic policy and economic thought. Policymakers suddenly have rediscovered policy responses from the depression and advocated, after the fact, by so-called Keynesian economists, followers o