"Economic History together with Economic Policy," which is available at his website. He begins (footnotes omitted):
"This has been a skilful crisis for economical history. It volition non surprise most members of this audience to acquire that at that spot was a sudden spike inward references inward the press to the term "Great Depression" next the failure of Lehman Bros. inward September of 2008. More interesting is that at that spot was besides a surge inward references to "economic history," get-go inward Feb of 2008, alongside growing awareness that this could live on the worst recession since you lot know when, together with 1 time again inward October, coincident alongside fears that the financial organisation was on the verge of collapse. Journalists, marketplace participants, together with policy makers all turned to history for guidance on how to react to this skein of otherwise unfathomable events."
Eichengreen discusses alongside aid together with special whether analogies are chosen because they are the best example, or because they are a salient illustration close inside living memory, or because they deliver an already-selected policy conclusion. Drawing on a broad diversity of political together with economical examples, Eichengreen points out that since historical episodes never exactly gibe acquaint events, oft the most productive agency to exercise history inward making economical policy is non to exercise a unmarried analogy, only instead to reckon a release of somewhat relevant episodes, together with to compare together with contrast the events, policies, together with outcomes. He makes the provocative signal that the pick of analogy has a vogue to guide policy responses. In the instance of the analogy from the Great Depression to the Great Recession:
"The analogy legitimated for sure responses to the collapse of economical together with financial activity spell delegitimating others. It legitimized the notion that the Fed should respond aggressively to foreclose the collapse of a few investment funds from precipitating a cascade of financial failures. This reflected the widespread currency of Friedman together with Schwartz‘s interpretation of the Great Depression – that what had made the Depression corking was the inadequate response of the Federal Reserve. ... The analogy alongside the Great Depression informed the policy response to the crisis to a greater extent than generally. The Federal Deposit Insurance Corporation increased deposit insurance coverage to $250,000 per depositor exactly 1 twenty-four hours later on press references to the Great Depression peaked. The activity was presumably informed past times the persuasion of the banking panics of the Great Depression equally runs past times uninsured depositors, together with the historical interpretation, widely shared, that those panics had played a telephone commutation purpose inward the contraction of the money furnish together with the harm of the payments system. The analogy alongside the Great Depression similarly lent legitimacy to the declaration that the Congress together with Administration should respond alongside financial stimulus. This reflected the "lesson" of history that the depth together with duration of the Depression were attributable inward no pocket-size purpose to the fact that financial stimulus was non used to counter the collapse of someone demand. ...
The analogy alongside the Great Depression besides delegitimized the temptation to respond alongside protectionist measures designed to bottle upwards the remaining demand. This reflected the lesson, widely taught to undergraduates together with invoked past times policy makers, that the Smoot-Hawley Tariff aggravated the crisis of the 1930s. In fact, this "lesson" of history is non supported past times modern research, which concludes that Smoot Hawley played at most a tiddler purpose inward the propagation of the Depression."
Eichengreen points out that these policy lessons are non the alone possible lessons from the Great Depression, together with that choosing other historical episodes mightiness own got emphasized other lessons.
"Did nosotros request a novel Neal Deal? Well, that depended on whether you lot sided alongside historians who fighting that the New Deal helped to destination the Depression or alone prolonged it. Did nosotros request a appal to the commutation charge per unit of measurement to rhythm out deflationary expectations? The answer depended on whether your persuasion was that Roosevelt‘s determination to own got the USA off the gilded criterion inward 1933 was the critical determination that transformed expectations together with ended deflation or whether you lot idea it was a sideshow. For those attempting to movement from metaphor to analogy, this was a reminder that the distilled, authoritative incapsulation of the menses remains a operate inward progress.
Although the Great Depression was clearly the dominant base of operations instance inward discussions of the 2008-9 crisis, at that spot were other possible analogies. There was the 1873 crisis, driven past times an investment nail together with bust similar that of the menses leading upwards to 2007, which led to the failure of brokerage houses, inward parallel alongside the problems inward 2008 of the investment banks. There was the 1907 crisis, inward response to which J.P. Morgan organized a lifeboat functioning that resembled inward of import respects the 2008 rescue of Bear Stearns past times none other than JP Morgan & Co."
Eichengreen besides makes the signal that the connecter from past times to acquaint besides industrial plant inward reverse: for example, electrical current economical events volition alter our historical agreement of the policy reactions to the Great Depression.
"The mainstream narrative is that the sense of the Depression led to a serial of institutional together with policy innovations making it less probable that something similar affair would hap again. American economical historians cite inward this connecter to federal deposit insurance, unemployment insurance, Social Security, the Securities together with Exchange Commission, the concentration of monetary-policy-making control at the Federal Reserve Board, together with automatic financial stabilizers. Historians of other countries own got similar list. Although the stabilizing behavior upon of special entries on these lists has been disputed, the thrust of the dominant narrative is clear.
We straightaway own got had a graphic reminder that nosotros own got less than fully succeeded inward corralling threats to economical together with financial instability. While policy responses may avoid the repetition of past times threats, they are no guarantee against time to come threats. Markets tend to accommodate to stabilizing policy innovations inward ways that homecoming those innovations less stabilizing. As memories of the before crisis fade, policy makers themselves locomote to a greater extent than probable to consort alongside marketplace participants inward this effort. I suspect that nosotros volition straightaway run into to a greater extent than attending to these longer-term adaptations to the legacy of the Great Depression together with less to the short-term policy response."