Wednesday, December 17, 2008

Crisis and government

Greg Mankiw presents us with this graph:


Mankiw notes that the rise in government occurred in response to the Great Depression and World War II, but then never declined afterwards (go read the entire analysis, which is only three paragraphs). What is particularly frustrating is that it's not as if the government even did a great job responding to the depression, with unemployment in double digits nearly 10 years after the crisis began.

Essentially we grew government in response to an economic crisis, which it responded rather poorly to, and then kept it that way.

And now it seems we are getting ready to do the same thing all over again.

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