Great Depression Lessons Learned?
Harvard economics professor Robert Barro answers some questions posed by The Browser about lessons to be learned from the Great Depression. Sample:
B: So your point is that even in the context of massive expenditures in a wartime situation, the multiplier effect of government spending on the economy is less than 1- i.e. it is not a multiplier at all. In other words, fiscal stimulus does not work. I read your WSJ editorial on this. Is that a good way for the layman to understand your arguments? Also on the “Voodoo Multipliers.”
~Randy
Ambiance 
amba12 said,
May 4, 2009 at 2:36 am
Uh-oh. There goes conventional “wisdom.”
wj said,
May 4, 2009 at 12:47 pm
Perhaps one lesson (albeit a personal one rather than a national one) is reflected in this. Mgean McArdle http://meganmcardle.theatlantic.com/archives/2009/05/falling_personal_savings_all_b.php notes that personal savings rates started down as the generation that came of age during the Great Depression passed from their peak earning years into retirement. And their children were not so careful.
I know my parents were really adamant about living within their means. They were willing to go into debt (in the form of a mortgage) to buy a house, but not to buy a car or anything else. And they made a point of paying off the mortgage early. I absorbed the lesson from them, which is why I’m not hurting today. But a lot of my contemporaries did not. Something tells me that, if the current crash is as long and painful as I suspect it will be (even if it doesn’t reach Great Depression levels), the next generation will end up saving a lot more, too.