Mitchell’s Musings 8-25-14: A Heritage of Snake Oil

23 Aug 2014 10:37 AM | Daniel J.B. Mitchell (Administrator)

It’s rare when you find an article in which you agree with the title but almost nothing else. However, I found one in an op ed entitled “Don't believe that a sluggish economy must be the new normal” by Stephen Moore, president of the Heritage Foundation and available at http://www.losangelesregister.com/articles/economy-603678-growth-percent.html.


I have expressed the view in previous musings that the “new normal” thing is being way overdone. Whenever there is an adverse blow to the economy, it seems as if someone begins promoting the idea that what has happened was some kind of structural shift and things will be bad from now on. During the Great Depression, for example, when the cause was clearly a negative macro shock, there were voices saying that new technology meant that unemployment would be high forever. The idea persisted until the unemployment rate fell to record low levels during World War II.


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