The lessons of history and economics

   If human beings have learned from past experience, they can make a better future. This seems to be a common sense. The question is: have we? This question is particularly pressing today. Whenever we face a big problem, we might wonder if we could have done better, and what enables us to do better is that we've learned from history. But have we?
   As economists, we are obviously concerned with economic crises. Crises happened before on and off. But have we learned from past experience? In a way, we have. But that depends on the nature of the crisis.
   Consider the last (major) economic crisis - financial tsunami in 2008. It is so severe as to be dubbed "great recession". The term is obviously analogous to the "great depression" that broke out in 1929, the most severe economic crisis in modern time. Both are "great"!
   On the one hand, we may think history has not helped us to prevent another crisis (the great recession) from breaking out. So, it seems that we have not learned from the history. On the other hand, we have learned from the past experience in handling a crisis, once broken out, and mediating the damaging effect of the crisis.
   The well-known programme of "quantitative easing" were launched after the crisis of 2008. This aggressive monetary policy with an aim at preventing the economy from collapsing like great depression really paid off. To see the effect, let us compare. During great recession, unemployment rate peaked at 10% in US, already a horrible figure. But during great depression, the rate peaked at around 25%, a  much worse situation! In 2008, people have done much better than before!
   In fact, one notable event in 1930s is the large scale bank bankruptcies. The result is that money supply not only did not increase but also decreased. Why bank bankruptcies may bring about a reduction in money supply? Answer: in modern economies, we reply heavily on deposits, which are part of the money supply. Banks as deposit-takers are crucial in the deposit creation, and thus money creation, process. Well, if you let banks go bankrupt on a large scale, the process would break down and money likely decreases.
   Most people with some economics background knowledge nowadays know that, during economic bad time, the right move to do is to adopt expansionary monetary policy, at least not to adopt contractionary monetary policy. What happened in 1930s was completely the contrary, however. You may ask: Why people in 1930s let money supply decrease? Is it because they don't know the economics that is common sense today? Well, there is no simple answer to this question as there were various factors simultaneously at work. But one thing is clear. If people in 1930s knew that letting banks bankrupt and money supply decrease would result in such an economic disaster. with hindsight, they will work much harder to prevent the money supply from decreasing and set this as a higher priority in their policy agenda.
   The lesson that people have learned from the great depression is that bank bankruptcy and money supply contraction is not something you afford to ignore. Viewed from this perspective, we can see that adopting quantitative easing after 2008 reflects that people have learned from this past experience.
   In fact, in 2008, the central bank of US (Federal Reserve Board) was chaired by Ben Bernanke, who is an economist and famous for his academic research on great depression. If even he hasn't learned the lesson from great depression, who will?
   Financial tsunami shows that we really can learn something from history, creating a better future, although what is improved is only about handling a crisis, but not to prevent a crisis.
   Now, let's look at two other issues - world wars and pandemics. Both events are disasters. Have human beings learned from the history for these two issues?
   For the former case, there has been no world-scale war so far since the last one (World War II). Wars still happen on and off but so far all these were not large scale wars comparable to what happened during 1940s. Perhaps people have learned some lessons from history.
   For the latter case, today there is exactly a pandemic. Pandemic happened in the past and now. Can such a widespread problem be prevented or better controlled? Have we learned from the history for such kind of issue? For which aspects we have done better and which we haven't? These questions cannot be easily answered. Perhaps the history in future will give us some answers.