Last week my post was on the definition of a recession and argued against using the “two quarters of declining GDP standard.” Little did I know that the very next day, the White House’s Council of Economic Advisors would write a blog post on this topic the very next day (essentially taking the same position as I did). The CEA post set of a long discussion on Twitter, which even spilled over into the national media.
I don’t want to get into that debate here today. Instead, let’s look at the history of dating business cycles, specifically in the 19th century. Forget waiting a few months or even a year for an official NBER announcement: the first attempt to date business cycles was going back over 100 years! In going over this history, perhaps we can learn something about our current debates over recessions, but I think the history is interesting in its own right (it’s also a great example of how we can get better data and use it to answer important questions).
I’ll give a brief history here, but read this Romer and Romer conference paper to get an excellent, full history of the NBER’s business cycle dating. The NBER was essentially found as an institution to study business cycles. One of the first major publications was Willard Thorp’s Business Annals, published in 1926. It was groundbreaking study, which not only provided annual business cycle dates for the entire history of the US, it also did so for 16 other countries for roughly the same time period!
While such an undertaking was impressive, the methods used were pretty unsophisticated from the hindsight of almost 100 years later. First, these are annual estimates, not monthly or even quarterly. Monthly estimates would come later, first appearing in Burns and Mitchell’s 1946 volume Measuring Business Cycles. Those monthly estimates began in 1854, and there are the same ones you will find on the NBER website today, essentially unmodified by even a single month for the late 19th century.
But what of the first half of the 19th century? How did Thorp date recessions?Continue reading