The Silent Depression

This article argues for a different measure of recession or depression the real income of the average worker or family. Why real income? It is because real income determines material living standards, and our standard of life is the best measure of economic progress. A recession or a depression interrupts progress, so if real income stops growing, it is reasonable to regard the economy as being in a depressed state. Furthermore, this approach leads us directly to the productivity question. In the final analysis, productivity is the ultimate determinant of the economic well-being of individuals, families, and the nation. Implicit in the foregoing argument is the idea that employment as such no longer suffices as a basic measure of the economy's state of health. Ever since John Maynard Keynes's classic work, The General Theory of Employment, Interest, and Income, appeared in 1936, the level of employment or its counterpart, unemployment has been the standard macroeconomic benchmark for measuring prosperity or recession. There were good reasons for this, because over most of the postWorld War II period there was a strong correlation between jobs and the prosperity of the individual or family. This linkage no longer holds to the extent it once did. If measures of real income for the worker and the