The Economist has a really nice piece this week on the Great Depression. Why did it happen? What can we learn from it for the current crisis? Have the lessons from the Great Depression been abused by contemporary policy-makers and central bankers?
We face two dangers when looking at the past to obtain lessons for today. First, the situation and institutions today may be totally different from the past, and thus applying lessons from the past is anachronistic at best. Second, we may have a totally wrong-headed understanding of what happened in the past.