Panic Won’t Solve Our Economic Problems

Marginal Revolution has two excellent posts (here and here) on a subject that keeps nagging at me. Basically, are we overreacting to this recession.

I put up a post a couple of days ago that referred to a New York Times article that pointed out this recession was statistically not as bad, so far, as the 1982 downturn. That doesn’t mean that it couldn’t eventually be worse, but that isn’t a given either.

Now to be fair, neither of the Marginal Revolution posts argue that the recession isn’t serious and both seem to believe that a range of actions is appropriate. But both posts also argue for a measured response to the situation. I thought the last piece of advice in Alex Tabarrok’s post was particularly useful:

Don’t Panic.  This is the policy that has cured most recessions.  The do anything and do it now mindset feeds panic.  I do think this recession will be longer than average and quite deep, it is a concern that it is worldwide.  But recessions are normal and we have unemployment insurance and other assistance programs to help people through tough times.  The economy will recover and its very possible to make things worse by trying to make things better.

I wonder why we don’t see more of that type of advice. It’s the sort of thing that I would expect to hear particularly from the political class. In fact, there seems to be quite the opposite sort of message coming from our leaders.

The more I think about this, the more convinced I become that we are going off half-cocked. A lot of pretty powerful policy actions have already been implemented on the monetary side. It might not be a bad idea to give them a little time to work before we start unfathomable amounts of money at a problem that still begs for definition.

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