Monday, March 2, 2009

What is a Recession

Lou Proyect posted posted an AP story to my pen-l list today about Depressions, which had this discussion of the origin of the term recession. I had not heard this before: Any comments?

Associated Press. 2009. "The D-Word: Will Recession Become Something Worse?" (2 March).

"Before the 1930s, any serious economic downturn was called a depression. The term "recession" didn't come into common use until "depression" became burdened by memories of the 1930s, said Robert McElvaine, a history professor at Millsaps College in Jackson, Miss. "When the economy collapsed again in 1937, they didn't want to call that a new depression, and that's when recession was first used,'' he said."

7 comments: said...

This sounds like it is probably correct.

Of course this reminds me of the old wisecrack, of which there are several variations, to the effect that "If he is laid off, it is a slowdown; if you are laid off, it is a recession; if I am laid off then it is a depression."

One variation on this has it that it is a depression when economists get laid off. I have also heard "bankruptcy" being added into the list somewhere, but subordinate to "you" and "I" in the succession.

ydue said...

JK Galbraith has a bit on this in a couple of his books, but the best is in "Money: Whence it Came, Where it Went" (p. 103 of my copy, p. 113, apparently, in other bindings):

"Where economic misfortune is concerned, a word on nomenclature is necessary. In the course of his disastrous odyssey Pal Joey, the most inspired of John O'Hara's creations, finds himself singing in a Chicago crib strictly for cakes and coffee. He explains this misfortune by saying that the panic is still on. His term - archaic and thus slightly pretentious - reflects the unfailing O'Hara ear. During the last century and until 1907, the United States had panics. But, by 1907, the language was becoming, like so much else, the servant of economic interest. to minimize the shock to confidence, businessmen and bankers had started to explain that any current economic setback was not realy a panic, only a crisis. They were undeterred by the use of this term in a much more ominious context - that of the ultimate capitalist crisis - by Marx. By the 1920's, however, the word crisis had also aquired the fearsome connotation of the event it described. Accordingly, men offered reassurance by explaining that it was not a crisis, only a depression. A very soft word. Then the Great Depression associated the most frightful of economic misfortunes with that term, and economic semanticists now explained that no depression was in prospect, at most only a recession. In the 1950s, when there was a modest setback, economists and public officials were united in denying that it was a recession - only a sidewise movement or a rolling readjustment. Mr Herbert Stein, the amiable man whose difficult honour it was to serve as the economic voice of Richard Nixon, would have referred to the panic of 1893 as a growth correction"

Shag from Brookline said...

A rose by any other name may still have thorns.

Ken Houghton said...

"Mr Herbert Stein, the amiable man whose difficult honour it was to serve as the economic voice of Richard Nixon, would have referred to the panic of 1893 as a growth correction"

Now we know where his son gets it.

Eleanor said...

I had noticed the move from "panic" to "depression" to "recession" to "downturn" or "soft economy." I missed crisis, which sounds scary to me, but if JKG said it was used, then it was used.

Let's go back to depression, uncapped at present, though we can cap it later, if it turns out to be truly serious.

TheTrucker said...

Well, Eleanor, can we put "great" in as an adjective after we pump up "depression" by capitalization?

That Sandwitchman dude is right. We don't need to adjust the economy (the GDP). We need to adjust our alleged minds:) Working less and measuring quality of life as opposed to the dollar denominated value of lip gloss would seem to yield a more honest assessment. Much is made of the "subjectiveness" of the "quality of life" indicators. But if their definitions (subjective as they may be) do not change over time then their measurement will record the success or failure of policy. I am of the opinion that something like the GDP (which is based on an opinionated "basket of goods" for a deflator") is much more subjective than infant mortality, life expectancy, annual deaths from illness and war, and all those sorts of metrics. The most important factor in the whole pile is the amount of leisure enjoyed by the middle class. The question is "After I have done all the crap I do not want to do in order to serve the society and see to my needs and those of my family, then how much TIME do I have for me?". Whether I spend my time fishing, chasing women, beer drinking, learning at the library, or teaching at a bible school is not germane to the actual measurements concerning political economy. How I conduct my life is not the province of people who use force; not the province of government, the tax code, and the activities of the central bank.

Anonymous said...

Robert McElvaine is incorrect. A quick glance at Wesley Mitchell's Business Cycles: The Problem and its Setting (1927) shows his discussion of cycles as consisting of four phases, namely: prosperity, recession, depression, and recovery. This likely goes back to his earlier 1913 book Business Cycles.