"To believe Big Government explains why this extremely long recession was not even longer, we need to find some connection between the size of government and the depth and duration of recessions. There is no such connection in U.S. history, or in recent cyclical experience of other countries.On the contrary, recessions have become longer as the U.S. government (and the Fed) became larger, more expensive, and more involved in the economy. Foreign countries in which government spending accounts for about half of the economy have also suffered the deepest recessions lately, while economic recovery is well established in countries where government spending is a smaller share of GDP than in the U.S."
Clarke writes:
"First, all statistical joykills are fond of pointing out that correlation does not equal causation. Even if it were true that there was a tight historical correlation between the size of governments and the length of recessions, this would not prove that big governments cause (or 'produce' in Reynolds' parlance) longer recessions. It could be the case that longer recessions produce bigger governments. Or it could be the case that some third factor produces both. A statistically significant relationship between the size of government and the length of recession is no more proof that one causes the other than is a statistically significant relationship between global temperature and the number of pirates."Sphere: Related Content
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