In this paper the authors estimate the potential benefit of policies that eliminate a small likelihood of economic crises. They define an economic crisis as a Depression-style collapse of economic activity. For the U.S., based on the observed frequency of Depression-like events, the authors...

The potential benefit of policies that eliminate a small likelihood of economic crises is calculated. An economic crisis is defined as an increase in unemployment of the magnitude observed during the Great Depression. For the U.S., the maximum-likelihood estimate of entering a depression is...