Date: Tue, 4 Dec 2001 09:19:01 -0500 From: Doug Henwood Subject: breaking news: stocks were undervalued in 1929!
>The Stock Market Crash of 1929: Irving Fisher Was Right!
>Ellen R. McGrattan, Edward C. Prescott
Wow. I think this has to be put in context ...
Prescott is a genuine giant of the profession, who has written two really ground-breaking papers. His arguments about the equity risk premium are really very good (he's also the godfather of central bank independence -- less good). Without having read it as I am too tight to pay up for an NBER subscription and do not yet possess a method of convincing them that I deserve a free one, I'd guess that a lot of this belief is based on his very low estimate of the equilibrium equity risk premium.
But, he has some decidedly heterodox views on the 1930s Depression. Basically, he takes the "neoclassical" view that it was, more or less, a decade-long outbreak of collective laziness on the part of the working class, and has pretty much said as much in this paper:
http://research.mpls.frb.fed.us/research/qr/qr2312.pdf
y'see it's all the fault of the government, which did something, we know not what, which removed the incentive to work ...
dd
Get Your Free Email at http://www.al-islam.com