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In a thought-provoking piece for the January issue of Vanity Fair , Joseph Stiglitz urges us to consider an important element of the Great Depression that has not received as much attention in the media as monetary policy, a troubled banking system, or political battling. Stiglitz points us to the shift away from agriculture in the late 1920s through the early 1930s as cause of the Depression. If we are to look more closely at that piece of history, then we may be able to extract important lessons for today, as we see so many Americans going through revolutionary changes in their work and in their workplaces. Citing resebarch that he has been doing with Bruce Greenwald , Stiglitz writes: The parallels between the story of the origin of the Great Depression and that of our Long Slump are strong. Back then we were moving from agriculture to manufacturing. Today we are moving from manufacturing to a service economy. The decline in manufacturing jobs has been dramatic—from about a third of the workforce 60 years ago to less than a tenth of it today. The pace has quickened markedly during the past decade. There are two reasons for the decline. One is greater productivity—the same dynamic that revolutionized agriculture and forced a majority of American farmers to look for work elsewhere. The other is globalization, which has sent millions of jobs overseas, to low-wage countries or those that have been investing more in infrastructure or technology. (As Greenwald has pointed out, most of the job loss in the 1990s was related to productivity increases, not to globalization.) Whatever the specific cause, the inevitable result is precisely the same as it was 80 years ago: a decline in income and jobs. The millions of jobless former factory workers once employed in cities such as Youngstown and Birmingham and Gary and Detroit are the modern-day equivalent of the Depression’s doomed farmers. The consequences for consumer spending, and for the fundamental health of the economy—not to mention the appalling human cost—are obvious, though we were able to ignore them for a while. For a time, the bubbles in the housing and lending markets concealed the problem by creating artificial demand, which in turn created jobs in the financial sector and in construction and elsewhere. The bubble even made workers forget that their incomes were declining. They savored the possibility of wealth beyond their dreams, as the value of their houses soared and the value of their pensions, invested in the stock market, seemed to be doing likewise. But the jobs were temporary, fueled on vapor. Mainstream macro-economists argue that the true bogeyman in a downturn is not falling wages but rigid wages—if only wages were more flexible (that is, lower), downturns would correct themselves! But this wasn’t true during the Depression, and it isn’t true now. On the contrary, lower wages and incomes would simply reduce demand, weakening the economy further. Of four major service sectors—finance, real estate, health, and education—the first two were bloated before the current crisis set in. The other two, health and education, have traditionally received heavy government support. But government austerity at every level—that is, the slashing of budgets in the face of recession—has hit education especially hard, just as it has decimated the government sector as a whole. Nearly 700,000 state- and local-government jobs have disappeared during the past four years, mirroring what happened in the Depression. As in 1937, deficit hawks today call for balanced budgets and more and more cutbacks. Instead of pushing forward a structural transition that is inevitable—instead of investing in the right kinds of human capital, technology, and infrastructure, which will eventually pull us where we need to be—the government is holding back. Current strategies can have only one outcome: they will ensure that the Long Slump will be longer and deeper than it ever needed to be. Read The Book of Jobs here .

Historian Edward Tenner wants us to take a positive view of unintended consequences. In a speech just made available by TedTalks , Tenner runs through all the remarkable innovation that came about somewhat accidentally. We've made a point here at The Watch to note all the successful companies that were born during economic downturns, and Tenner makes sure to highlight some of these examples as well. But this is a much longer view of important shifts in culture, development, and business.

We've just been through the worst recession since the Great Depression, so one thought is that these are rare events and and don't need a lot of attention in core classes. But Mark Thoma argues that depression economics needs to become a standard part of macro courses: Since large contractions of the type we’ve recently experienced are relatively rare, it’s easy to understand why research and teaching about this topic wanes over time. There are generally pressing contemporary issues that crowd out older questions. But not fully understanding how these events occur, and not knowing what the best response is when they do happen, makes it difficult for us to prevent large downturns in the first place, and to respond to them effectively when they happen anyway despite our attempts to prevent them. We need to have research and teaching about depression economics continue even as the recent downturn fades from our memory. This type of classroom instruction from Brad DeLong and others is a start, and there have been many academic papers recently trying to understand how economies work when they are far from full employment, interest rates are at zero, etc. The question is whether people like Brad will continue to teach this topic ten years from now — will we begin to see separate chapter in the textbooks on “depression economics”? — and whether research into these questions will continue to find a place in the best journals. Read Thoma's full CBS Money Watch column here .

The 2010 Pulitzer Prize winners were announced yesterday, and an investment manager won in the History category. Liaquat Ahamed , director of Aspen Insurance Holdings, won for his book Lords of Finance , a compelling look back at the economics of World War I and the Great Depression that Janet Maslinm in a New York Times review, said "easily connects the dots between the economic crises that rocked the world during the years his book covers and the fiscal emergencies that beset us today." Ahamed made some of those connections in an interview last year in an interview with David Kurtz of Talking Points Memo: You can also watch a longer talk from Ahamed at Johns Hopkins here .

Add Fed Chair Ben Bernanke's voice to the growing chorus that the recession appears to be over and a long slow recovery is beginning. Bernanke spoke at the Brookings Insititution yesterday about the events of the last year, and during his speech he noted that he was well aware that forecasters were announcing the end of the recession. Here is a key excerpt from the speech. But the general view of most forecasters is that that pace of growth in 2010 will be moderate, less than you might expect given the depth of the recession, because of ongoing headwinds, including still ongoing financial and credit problems, you know, deleveraging by households, the needs for adjustments in the economy, sectoral adjustments in the economy, the need for a fiscal exit at some point, many, many factors that will likely, at least based on current information, make the 2010 recovery moderate, and in particular, not much faster than sort of the underlying potential growth rate of the economy. And the arithmetic is that unless the economy grows, you know, significantly faster than its longer term growth rate, it’ll be relatively slow in creating jobs over and above those needed to employ people coming into the labor force, and therefore, the unemployment rate would tend to come down quite slowly. So that’s a risk, that’s a possibility. Of course, there is on both sides of that forecast; we could have a stronger recovery, we could have a weaker recovery, but if we do, in fact, see moderate growth, but not growth much more than the underlying potential growth rate, then, unfortunately, unemployment will be slow to come down. It will come down, but it may take some time. Obviously, that’s a very serious concern, and that’s one reason why, even though from a technical perspective the recession is very likely over at this point, it’s still going to feel like a very weak economy for some time as many people will still find that their job security and their employment status is not what they wish it was, and so that’s a challenge for us and all policy-makers going forward. You can read a full transcript of the speech, and watch the full session by clicking here .

The Milken Institute is holding its annual Global Conference this week, and as at conferences past, Michael Milken himself chaired a panel discussion of Nobel laureates in economics. This year's panel: Gary Becker , Nobel Laureate, 1992; University Professor of Economics and Sociology, University of Chicago Roger Myerson , Nobel Laureate, 2007; Glen A. Lloyd Distinguished Service Professor in Economics, University of Chicago Myron Scholes , Nobel Laureate, 1997; Chairman, Platinum Grove Asset Management The theme this year was " Whither Capitalism? " The panelists covered a wide range of topics, from comparing the current recession to the Great Depression (they think it is not an apt comparison); to regulation and short-term efforts to shore up the financial system; to long term matters of concern, like education. There is a heavy Chicago School infulence in the discussion, and the panelists show little fear that free market principles prevail and capitalism is not going anywhere. Watch the discussion by clicking here . Start at 15 minutes in if you want tot skip the conference business and Milken Institute marketing:

Robert Shiller writes in a Bloomberg commentary today that the US is in danger of facing another Great Depression. And while he lauds the Obama Administration for "stronger efforts to date" than during the Depression, he calls for more stimulus spending: In the face of a similar Depression-era psychology today, we are in need of massive pump-priming again. We appear to be in a much better situation due to the stronger efforts to date. Still, there is a danger that, because of a combination of faulty economic theory and inadequate appreciation of human psychology, as well as deep public anger, we will not continue with such stimulus on a high enough level. We desperately need to be persistent, keeping our government response adequate for the problem at hand on a sufficient scale and for sufficient time. Earlier this week, Shiller discussed the financial crisis and the current recession as compared to the Great Depression with his fellow Yale economists John Geanakoplos and Richard Levin (also president of Yale). They also compared the current government response to the government efforts during the Depression, and deficits and stimulus spending (Levin calls World War II the stimulus package for the Depression) from both periods. Some of the conversation is a repeat of a February panel in which these three economists were all participants. If you have already viewed that discussion (available here ), you can skip to 15 minutes in on this video (which has the added benefit of skipping most of the Yale back-patting, if that is unappealing for any reason). You can read Shiller's Bllomberg commentary here.

The Congressional Oversight Panel was set up to oversee the Treasury Department's implementation of TARP and the effectiveness of distributing federal bailout money. Chair Elizabeth Warren and the panel have kept their process highly transparent-- something they've called on the Treasury Department to do as well . Earlier this month they brought in experts on notable banking crises of the last 100 years, and had them share lessons on goverment responses to those crises. The Savings and Loan collapse of the 1980s, Japan's banking crisis and its monetary policy reaction in the 1990s, Sweden's nationalization of banks --also in the 1990s, and of course the Great Depression , were the lead topics. The experts were Bo Lundgren , Director General, Swedish National Debt Office and Former Swedish Minister of Financial and Fiscal Affairs; Richard Katz , Editor-in-Chief, The Oriental Economist and author of Japan: The System That Soured—The Rise and Fall of the Japanese Economic Miracle and Japanese Phoenix ; David C. Cooke , former executive director of Resolution Trust Corporation; and Eugene White, p rofessor of economics, Rutgers University, and research associate at the National Bureau of Economic Research.