Thursday, October 29, 2009

How to avoid a repeat of the Great Crash

When it came to practical issues of economic policy, Keynes preferred to appeal to common sense rather than abstruse economic theory. Indeed that is the basis for his famous maxim, "in the long run we are all dead". Routinely misinterpreted as a heedless call to ignore long-term consequences, it is an indictment of a doctrinaire refusal to open our eyes to the real world around us. So when we ask why the Great Crash led to the Great Depression, and how our situation today is different, part of the answer is that some of the relevant lessons have been absorbed. For once, history and economics have been heeded in a pragmatic way, and policy has marched in step with common sense.

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