Should we welcome the occasional immiserating recession?

You don't hear this line of argument much in the mainstream press, but Christopher Hayes, writing in The American Prospect, explores the hypothesis that a good recession (or even depression) can be just what the macroeconomic doctor ordered. That argument, he notes, has a long lineage:

Famed economist Joseph Schumpeter said that "a depression is for capitalism like a good, cold douche," one that rinses off accumulated dysfunction. Robber baron Andrew Mellon (who served as Herbert Hoover's treasury secretary) welcomed the Great Depression with these infamous words: "It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people."

And while they keep such conversations mostly to themselves, there are no few Wall Streeters who still hold similar views, Hayes reports:

Recently a bond trader told me he hoped that the Fed would raise interest rates and plunge economy into a truly deep, painful (but he hoped, quick) depression. "I don't think that would be good for you," I said. "Oh, I'd be fine," he responded. (I meant politically: as in, there'll be people with pitchforks at your door. We were talking past each other I suppose.)

The bond trader meant that he could survive a depression just fine, financially. Would that we all could.