NewsTalk

Welcome to the archives for NewsTalk, an IBJ blog published from November 2007 through December 2010.

Stability versus boom-and-bust

September 25, 2008
Itâ??s a rare person who enjoys the asset bubbles and boom-and-bust cycles that afflict the U.S. economy, most recently the subprime mortgage crisis and implosions on Wall Street.

But Purdue University economist David Hummels contends that the United States deals with the swings better than many other countries.

Boil down the differences between Americans and Europeans, Hummels says, and Americans are willing to let a relative few unemployed people bear the brunt of downturns while Europeans prefer thicker safety nets.

Laid-off Europeans have an easier time when their luck is down, but they arenâ??t forced to get back to work as quickly as Americans, Hummel notes. While the U.S. offers a certain amount of unemployment compensation, it doesnâ??t last long, which pushes people to become productive again even if they donâ??t necessarily like the job theyâ??re forced to take.

Hummel understands something about pain caused by gyrating economies. His father was laid off several times while Hummel was growing up in Colorado, putting a great deal of strain on the family.

Still, if forced to choose, he prefers turmoil over safety.

â??I reluctantly say, I like the American model better, but Iâ??m in a position where I donâ??t get laid off,â?? says Hummel, who is tenured. â??Unless Purdue shuts down, Iâ??m in great shape.â??

If you had to choose European-style stability or American boom-and-bust, which would you prefer?
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