Nobody is going to be happy with the explanation that things could have been much worse if we hadn’t learned these lessons from the past, or even with the fact that the U.S. actually did not have a worse recession than the rest of the world this time, and in fact is having a better recovery. But if you want to ask, Have we learned anything from economics, the answer is: Oh yeah.
Look at George W. Bush and Barack Obama. We think of them as being on different planets politically. But guess what? They did pretty much the same things in response to this crisis. They saw a situation in which the whole financial sector was shutting down, and concluded that the government had better do what it could on every front. And sure, it would be nice if it had worked faster or been cheaper, but economic policy worked. What we had was a recession that was in the same league as the recessions of the mid-1970s and especially the early 1980s, albeit somewhat nastier. But it was nothing in comparison to the Great Depression.
S+B: How do you view the political–economic debate in the U.S. today, where one party is urging a return to the pre-Keynesian, pre-Fisherian economic policies of the early 20th century?
NASAR: It’s a lot of noise. It’s like the people who, in the middle of the recession, were saying that this is the end of capitalism and we now have to do everything different. No, excuse me, let’s not. People tend to talk about economic policy as though there is a blank slate. It’s more like we are climbing a mountain, and the question is where do you take the next step. We are always going from where we are, even though the language of the debates suggests that it’s all or nothing.
S+B: Here’s another Keynes quote: “If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid.” Do you agree?
NASAR: Yes. That’s a great quote. Keynes had a very modest view of what economics could and couldn’t do. He once offered a toast to “economists, who are the trustees, not of civilization, but of the possibility of civilization.” He felt that the real trustees of civilization were the artists and philosophers of the world, and that economists could best help civilization by minimizing crises and setbacks, and ensuring that there was a continual rise in the standard of living.
Reprint No. 11311
- Rob Norton is executive editor of strategy+business.