NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Great Recession in the Shadow of the Great Depression: A Review Essay on "Hall of Mirrors: The Great Depression, The Great Recession and the Uses and Misuses Of History"

Lee E. Ohanian

NBER Working Paper No. 22239
Issued in May 2016
NBER Program(s):EFG

This essay reviews Barry Eichengreen's recent book that compares the Great Depression and the Great Recession. Eichengreen focuses on deficient aggregate demand as the key reason for why both downturns were so deep and why they lasted so long. I assess the book's arguments regarding the causes and consequences of these episodes from a neoclassical perspective. I provide an alternative framework for analyzing these episodes, and argue that a key difference between the 1930s and today reflects the factors that continued to depress both economies after their respective troughs. The post-Depression economy featured rapid productivity growth, whereas today's economy is plagued by low productivity growth. I discuss how the post-Great Depression economy recovered to trend quickly once policies that depressed competition were removed. I also argue that returning today's economy to trend may be considerably more challenging.

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Document Object Identifier (DOI): 10.3386/w22239

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