Interview with Robert Barro, on the New Deal and Great Depression

by on May 3, 2009 at 7:42 am in Economics, History | Permalink

From The Browser, here is one bit:

It’s clear that a lot of the policies that were put into place were
negative, but as to sorting out how important they were, that’s a much
more challenging question.  And I think Roosevelt at the time
recognized ex-post that some of the things he tried were failures and
then his attitude was “OK, it’s a failure I’ll stop doing it.” Which is
actually pretty positive. For example, some of the things he did was
try to organize labor unions and also businesses essentially promoting
monopoly – I don’t think that was a plus.  He was trying really hard to
keep wages and prices from falling with direct influence and that was a
negative. The effect of the expenditure programs is less clear. In the
mid-1930s with the New Deal there was an unusual amount of
infrastructure-type of expenditures. But it’s not actually big enough
to sort out in a statistical sense — to figure out how much it
mattered in terms of the recovery after the trough in 1932-33. I don’t
think we know that that was a mistake, but it’s not clear that it was
all that important.

Barro also offers a reading list on the topic.

1 Steve Roth May 3, 2009 at 10:59 am

I’m kind of stunned to hear Barro say this:

“You know one of the things I’ve been trying to do in my research is to calculate the effect, particularly on Gross Domestic Product, of government expenditure programs. And I’ve been focusing on the US experience, because that’s where I have the information”

When in fact 1. a great deal of his research consists of cross-country analysis on the determinants of growth, and 2. Those cross-country analyses are pretty much the closest thing we can get to a natural experiment.

US-only analyses are fairly useless because of course you can’t re-run the tape with different priors. (viz, the rather extraordinary contortions that Romer went through trying to tag tax changes as endogeunous or exogenous based on lawmakers’ “intentions.”)

I’ve pointed out repeatedly that he ignores his own data and results when it doesn’t support what he seems to want to believe.

http://www.asymptosis.com/an-open-letter-to-robert-barro.html

He has the cross-country data that would help tease out these answers. Why doesn’t he follow that path?

2 JSK May 3, 2009 at 2:57 pm

Spain was integrated into the European Single Market around the same time, Colin. So honestly, the example is virtually worthless.

3 Colin May 3, 2009 at 10:08 pm

JSK, appreciate the feedback but Spain joined the EC in 1986 so I am not sure how that would explain the decline in unemployment about 8-10 years later. What am I missing?

Also, in my first post I meant to ask whether the parallel with the depression was too DIS-similar to be relevant.

Sorry for the thread hijack. Just curious if anyone had any insight here.

4 Jim Hass May 3, 2009 at 10:40 pm

Some of the unique features of the Spanish economy of those years was extraordinarily restrictive labor law. Key initiative of the Aznar government was a less restrictive regime of part-time and temporary work. After a few years a huge number of people gained income and experience in the legal labor market under this policy. A sort of anti-FDR example.

5 Jim Hass May 3, 2009 at 10:43 pm

Some of the unique features of the Spanish economy of those years was extraordinarily restrictive labor law. Key initiative of the Aznar government was a less restrictive regime of part-time and temporary work. After a few years a huge number of people gained income and experience in the legal labor market under this policy. A sort of anti-FDR example.

6 indiana jim May 4, 2009 at 10:22 am

From the above:

“And I think Roosevelt at the time recognized ex-post that some of the things he tried were failures and then his attitude was “OK, it’s a failure I’ll stop doing it.† Which is actually pretty positive.”

As the old saying goes: “Better late than never, but better never late.” The point is that late is late; and by extension wealth destroying policy is wealth destroying policy. It serves no good purpose to say that folly followed by realization is on net “pretty positive.” FDR’s destruction of farm goods, for example, was assuredly asinine. If he stopped doing it at some point, well, I don’t say: Magnifique!

Barro says (above): “It’s clear that a lot of the policies that were put into place were negative, but as to sorting out how important they were, that’s a much more challenging question.” Judgment is required of course in making empirical assessment, but an intelligent assessment is impossible if on net folly followed by realization much later is considered “pretty positive.”

7 indiana jim May 4, 2009 at 7:53 pm

Colin,

You are welcome; the question I have is why scholars like Barro who know better than to play these petty little rhetorical games to defend FDR don’t feel more shame. Maybe the cocktail party circuit that they are hooked into is worth selling their souls for.

8 HP Pavilion laptop battery May 18, 2009 at 8:26 am

Spain was integrated into the European Single Market around the same time, Colin. So honestly, the example is virtually worthless.

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