The Great Recession of 2008

Booms and busts in the economy occur with enough frequency that many people think they are both inevitable and inexplicable. They are almost always neither. Each adventure on the economic roller coaster has a cause (or causes), and each can be reasonably explained. If we learn the lessons that careful observation and analysis teach, we can avoid these wild rides or at least smooth them out.

 The man who parties like there’s no tomorrow puts his body through an “up” and a “down” course that looks a lot like the . At the party, the man freely imbibes. He has a great time before stumbling home at 2:00 a.m., where he crashes on the sofa. A few hours later, he awakens in the grip of the dreaded hangover. He then has a choice to make: get a short-term lift from another drink or dry out. If he chooses the latter and endures a few hours of discomfort, he can recover. In any event, no one would say the hangover is when the harm is done; the harm was done the night before and the hangover is the evidence of it.

 The Great Recession (or the Great Hangover) that began in 2008 didn’t have to happen. Its causes and consequences are not mysterious. Indeed, this particular and very painful episode affirms what the best nonpartisan economists have tried to tell our politicians and policy makers for decades, namely, that the more they try to inflate and direct the economy, the more damage the rest of us will sooner or later suffer. Hindsight is always 20-20 but in this instance, good old-fashioned common sense would have provided all the foresight needed to avoid the mess we’re in.

 In a new essay by fellow economists Peter Boettke and Steven Horwitz, the authors trace the path of the recession from its origins in the prior boom to the policies offered to cure the aftermath. No citizen need any longer throw up his hands in despair and declare, “This is too hard for me to understand. I’ll just have to grin and bear it and hope the politicians can fix it.” That’s a sure-fire prescription for making sure it all happens again. Here’s the essay: http://fee.org/doc/the-house-that-uncle-sam-built/


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