Writes Joseph Salerno in response to my query: “The National Bureau of Ecnomic Research began its arbitrary and distortionary method of dating business cycles in 1946 (see Murray’s ‘The National Bureau and Business Cycles‘ in Making Economic Sense). Browsing through pre-war books on Depressions it is pretty clear that a depression–and that term was widely used up through WWII–was defined as an economy-wide fall in production and employment.
“Most economists up to the 1930s would have agreed with Paul Douglas (Controlling Depressions 1935) when he stated, “in the beginning a business depression manifests itself in a decrease of production, a laying off of men…and a decrease in the purchases of raw materials and products which are needed in industry.’ In his book on The Great Depression Robbins prominently featured statistical appendixes on industrial production and unemployment. I think the proper definition is essentially theoretical rather than empirical, that a depression is the period following an expansion of bank credit (fiduciary media) during which the relative production of capital and consumer goods, that is the production structure, is readjusted to reflect the genuine time preferences of consumers. The empirical manifestation of this definition tends to be a longer or shorter period of a temporary increase of unemployment and underutilization of other productive resources and a decline in output especially of capital goods.
“However, this is not always the case if you have a very high saving economy like Japan which was clearly in a depression in the 1990’s, but it manifested itself in the slowing in the rate of growth of capital goods etc. rather than a decline in the absolute level of production. In America’s Great Depression, Murray tends to use variations of manufacturing production of durable goods as a proxy for capital goods production. Regarding the terminology, Murray always argued that terms like ‘recession’ or growth ‘slowdown’ or ‘soft landing’ were all just euphemisms for ‘depression,’ which itself was coined as a euphemism to replace the harsher earlier 19th-century terms ‘panic’ and ‘crisis.'”
12:28 pm on February 17, 2008 Email Llewellyn H. Rockwell, Jr.
