Chapter 1 Curiosities

Evan provided a good example. If you remember when we chatted in class, I mentioned in that it is "common knowledge" among many that the Great Depression ended because of WWII breaking out and America supplying Europe with war machines (and later joining the war as well). That argument stems from one of correlation, not causation as they would have you believe. America started making a bunch more stuff when WWII broke out, increasing GDP (a macroeconomic indicator that shows how much a country makes in a given year). One just looking at GDP can use that number going up to show that since GDP was no longer decreasing, but increasing, that the Depression was over. On paper, sure, but one must ask why GDP was increasing. Was it increasing because Americans were becoming much wealthier, consuming more goods and services? No, GDP was increasing because of government spending. Americans were still living on rations - not what comes to mind when someone says an economy is doing well. In truth, America didn't stop being impoverished until after the war when resources were freed up from the war machine, and able to be used by the private sector.