Tuesday, October 11, 2011
From Hal Cole and Lee Ohanian...Lessons from the Great Depression....or "Welcome Home Ed Prescott"
If you can hold your nose and get past the first part of the article where they have to beat every economic fact into a real business cycle interpretation, they have some great things to say about today.
Of course, not everyone is all that comfortable with the interpretation that the data have been given by Cole and Ohanian and for good reason. Why in the world the Real Business Cycle folks can't acknowledge the vast importance of the gold standard during the Depression is beyond me. Lee Ohanian has one sentence in one paper saying it would have helped the Depression if the Fed would have been more expansionary early on in 1930. I have waited for those words for some time.
As I have said in the past, I was at a conference and heard Ed Prescott say "all of this financial market stuff that people are worrying about is much ado about nothing."
Well Dr. Prescott the men in the white coats are not far behind you...Welcome home Ed Prescott: