Great Depression.
A severe recession from 1980 to 1982, comprising two NBER contractions,
a short contraction within the year 1980 and, soon after, another contraction
1981–82, associated with a war in the Middle East. At the time, this
recession was called the “Great Recession,” again inviting comparisons
with the Great Depression.3
A severe recession from 2007 to 2009, also named the “Great Recession,”
once again inviting comparisons with the Great Depression, and this time
the name really went viral and has stuck to this day.
These recessions and depressions are narratives in themselves, active in
producing subsequent events. Thought in any economic downturn tends to
emphasize the last large downturn, with attention also paid to the record-holder.
In the United States and much of the world the record-holder is, of course, the
Great Depression.
Usually, economic historians who attempt to identify the causes of recessions
and depressions list events that were contemporary with the downturns: bank
failures, strikes, acts of government, gold discoveries, crop failures, stock market
events, and so on. Such information is useful, but our goal is to consider these
depressions and recessions in terms of the prominent narratives and narrative
constellations that likely helped bring them about or increase their severity.
Ultimately, however, we can give no final proof of causality because these
events are so deeply complicated, and multiple narratives are involved. But the
cumulative influence of narratives in the gestation of these very serious
economic events is beyond circumstantial.
The first step in our task is organizing and classifying some of the major
economic narratives and the mutations that allowed them to recur over long
intervals of time. The remaining chapters in this part describe nine perennial
economic narratives, along with some of their mutations and recurrences. Most
readers will recognize these narratives in their most recent forms but not in their
older forms:
1. Panic versus confidence
2. Frugality versus conspicuous consumption
3. Gold standard versus bimetallism
4. Labor-saving machines replace many jobs

5. Automation and artificial intelligence replace almost all jobs
6. Real estate booms and busts
7. Stock market bubbles
8. Boycotts, profiteers, and evil business
9. The wage-price spiral and evil labor unions
Some of these chapters present a pair of opposing narrative constellations (for
example, frugality versus conspicuous consumption). These pairs suggest
opposite economic actions and opposite moral judgments. At certain times one
of the constellations may work toward extinguishing the other, but at other times
it may help reinforce the other constellation through the controversy generated.
Note that these chapters are organized thematically, not chronologically,
because the themes are relevant beyond the specific historical moment in which
they occur. Our main goal is to extract common themes from these narratives
that will help us recognize and anticipate the effects of future economic
narratives.

Chapter 10
Panic versus Confidence
Since the early nineteenth century, a major class of narratives about confidence
has influenced economic fluctuations: people’s confidence in banks, in business,
in one another, and in the economy. Economically, the most important stories are
those about other people’s confidence and about efforts to promote public
confidence.
Among the earliest confidence narratives are those about banking panics—
that is, whether we have confidence in the banks to make good on their
promises. We mean not only public confidence in the morality of bankers and
bank regulators but also confidence in banks’ other customers, confidence that
they will not all try to withdraw their money at once. Raymond Moley, one of
President Franklin Roosevelt’s “Brain Trust” experts during the Great
Depression, put this idea into a simple narrative:
A Depression is much like a run on a bank. It’s a crisis of confidence. People
panic and grab their money. There’s a story I like to tell: In my home town,
when I was a little boy, an Irishman came up from the quarry where he was
working, and went into the bank and said, “If my money’s here, I don’t want
it. If it’s not here, I want it.”1
This and other confidence narratives help us understand major events marking
modern history.
Several classes of confidence narratives have characterized the history of the
industrialized economies. The first class is a financial panic narrative that
reflects psychologically based stories about banking crises. The second class is a
business confidence narrative that attributes slow economic activity not so much
to financial crises as to a sort of general pessimism and unwillingness to expand
business or to hire. The third is a consumer confidence narrative that attributes
slow sales to the fears of individual consumers, whose sudden lack of spending
can bring about a recession. Figure 10.1 plots the succession of these narratives
since 1800. All of these slow-moving narratives have shown growth paths that