Robert Lucas on the Great Depression and the current stimulus package

Here's a transcript of Robert Lucas' talk at the Council of Foreign Relations (March 30, 2009). This is a great overview of what he (and others form the Chicago school) believe about how the Fed should respond in such situations. In the talk he discusses what we did and should have learned from the Great Depression and discusses his views on the current economic situation, specifically regarding the stimulus packages.

A couple of my favorite parts of the transcript:

And one of the lessons of the Great Depression, which has been discussed in many of the sessions today -- this morning, is that a side effect of depression is a proliferation of ill-conceived, hastily put together policies that serve to postpone the recovery.


So I think this monetary response that we're in the middle of now, I think it is a response to the lessons of the 1930s. It's not the whole problem of the 1930s, because there are all kinds of policies that were crucial to that evolution, that monetary policy's not going to touch, and didn't touch in the 1930s. But, I think the monetary -- in terms of the stimulus response, if you could -- a stimulus to get -- help us accelerate the recovery, I think the current policy we're doing is the right one, and I just hope that we have the nerve to terminate it when it's done its job. Thank you.
(Applause.)
(Mr. Lucas apparently trips on the stairs.)
SCHRAMM: (Off mike.) Are you okay?
LUCAS: Yeah.
SCHRAMM: All right.
LUCAS: It wasn't exactly a subtle step, was it? How the hell did I miss it? (Laughter.)