Recessions Occurred Less Often After the Great Depression

The economy in general is always fluctuating in a cycle of expansions and recessions, which is called the business cycle. The business cycle has always been present in all of American history, but how often a recession occurs seemed to have changed after the Great Depression.

From 1796 to 1836, the average time between recessions is estimated to be somewhere around two and a half years. During the free banking era, which lasted from 1837-1862, the average time between recessions was around two years. From 1862 to the Great Depression, the average time in between recessions was still around two years. The creation of the Federal Reserve seems to have had no impact on the business cycle. The average time in between recessions from the start of American history to the great depression is around 2.2 years. The average time between recessions is about 4.9 years from the end of the Great Depression to today, a 122.7% increase compared to the pre-Depression period.

So why did the business cycle change after the depression? After the depression, the Federal Reserve and the government started to change their economic policies, such as deficit spending or an inflation target. Meanwhile, the government attempted to ease the effects of the business cycle by utilizing automatic stabilizers. This is one possible explanation for the change in the business cycle.

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