Two prominent medical researchers reviewed hundreds of thousands of records on infant and childhood mortality dating back over the last eight centuries. They discovered that over the vast majority of this 800-year period, only around half of newborns survived to adulthood; they concluded that we should not expect our children to live to adulthood.
Anyone reading this paragraph should be fuming at the absurdity of this sort of extrapolation. Almost everywhere in the world, from the 13th to the 19th centuries, people lacked the healthcare advances that we take for granted. They lacked modern sanitation advances, like sewage disposal and clean drinking water; their diets were often grossly inadequate; and they didn’t have the benefits of modern medicine, like antibiotics. The enormous differences in these and other areas make it absurd to extrapolate about health outcomes from prior centuries to the present situation.
While the absurdity of such extrapolations on health outcomes should be immediately apparent, for some reason, those in policy circles think it is perfectly reasonable to make the same sort of extrapolations when it comes to economic outcomes. Two prominent economists, Ken Rogoff and Carmen Reinhart, did an extensive examination of financial crises over the last eight centuries. They found that the after-effects of these crises tend to be longlasting, with economies often taking a decade or more to get back to normal levels of output.
This is an interesting and worthwhile historical exercise. But why would anyone think that this past history any more condemns economies to suffer prolonged downturns from the recent financial crisis than that past history will condemn our children to an early death. Just as we have made enormous advances in public health and medicine, we have reason to believe that we have made enormous advances in economics as well.
The most obvious advance was the writings of Keynes in the 1930s, who explained how an economy could endure a prolonged downturn like the Great Depression. He also explained how the government could provide the boost necessary to get an economy back to normal levels of employment and output. There, of course, has been much work subsequent to Keynes that built on his basic insights. In principle, this work implies that there is no reason that economies should ever again be forced to endure long periods of high unemployment, just as there is no reason for us to expect 16th-century mortality rates for our children.
For the full article published in the Guardian click here
