Economists v. Historians on the New Deal and the Great Depression

Writing at The Beacon Jonathan Bean nicely reminds us of Robert Whaples survey of economists and historians on questions in economic history.  Among the questions that Whaples asked members of the Economic History Association to express agreement or disagreement on was the following:

Taken as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression.

About half of the economists agreed (or agreed with some provisos) that the New Deal lengthened and deepened the Great Depression.  Thus this point of view among economic historians is basically mainstream.  Among historians there was much less agreement with the statement, although a significant minority, 27%, agreed, mostly with some provisos. 

Comments

Tetlock, Tetlock, Tetlock. Please explain to us Alex why this group of experts is any better than a group of monkeys tossing coins. Why should we believe they are offering us anything more than social proof?

StreetWalker - you are pushing Tetlock's finding too far. See Caplan's review.

http://econlog.econlib.org/archives/2007/12/my_defense_of_e.html

JR - all the historians are members of the economic history association.

So some 70-80 years of study by experts and they conclude that on average we don't know the effects of government action/inaction with respect to the great depression.

Hmm, and so looking back in the past for clues as to how to deal with the current problem is reasonable because why?

For all this libertarian FDR bashing, I would remark FDR had a relatively high approveal rating among people who actually lived during those years.

On December 31, the below link was posted as an adjunct to the question about
whether it matter if judges knew some economics.

Clearly, historians and some economist don't. Does it matter?

The legacy of FDR is a beneficiary of the repitition of the big lie and what really
matters is that historians are the authors, not the critiques of a continued hagiography
of FDR.

http://www.truthonthemarket.com/2008/12/30/is-antitrust-too-complicated-for-generalist-judges/

Wow. No wonder economists sink in public esteem by the day. Not only are they wrong about current events, but wrong about the past, where the record is clear!

"Wow. No wonder economists sink in public esteem by the day. Not only are they wrong about current events, but wrong about the past, where the record is clear!"

And why exactly are the economists wrong?

But how many of them believe that the New Deal was beneficial apart from the disastrous attempt to reestablish the gold standard?

Andy,
you mean the fuckers who installed gatling guns in their mansions to hold off foreseen riots?
Or the ones that led a coup against FDR?
those idiots?

(Hmmm, I wonder why libertarians often discount impassioned popularity. No I don't)

No, I don't mean those, I refer to the ones discussed by Amity Shlaes, 'the forgotten man.' But intelligent politicians should take all constituencies into consideration.

Well, something prolonged it. The Depression didn't end until WWII for god's sake. Would it ever have ended otherwise?

Given that the absolute bottom in economic activity was in the month that FDR took office -- March 1933 was the official bottom of the 1929-33 downturn and the 1937-38 recession did not take the economy back below that low -- how can you take seriously anyone who thinks that FDR and the New Deal make the depression deeper?

That is just plain 100 % wrong and arguing that two plus two equals five.

I challenge anyone to show me a single fact that the New Deal deepened the depression. You can argue that it make the recovery weaker or longer but not that it deepened the depression.

What? No "Agrees - with provisos"? Were there actually no historians or economists who agreed but had something to add beyond the simplistic Agree? Or is the question designed to make the Disagree results look soft? If this is what passes for rigor among libertarians then it's no wonder they are in retreat.

Just have a look at this chart and it tells the story on what the New Deal actually did:

http://mast-economy.blogspot.com/2008/12/and-what-about-jobs.html

The depression was lengthened? Perhaps, but at least folks got back to work quickly!
Listen folks unemployment was at close to 30%... and the Hoover administration did
absolutely nothing, nada! In fact, in one of Hoover's final statements to the nation
he had the nerve to go on the radio and say, "there is nothing more to be done... we have
done all that we can do..."

Give me a break! At least this Bush admin with Paulson is doing something!

To answer Bernard's questions, serious economic historians belong to the Economic History Association so yes this represents the views of economists and historians whose primary work is in the field of economic history. Notice also that the article was published in the Journal of Economic History, probably the most prestigious journal in the field.

These kind of survey's are generally worthless other than to get a sense of what a certain academic community might think. It doesn't answer anything. Please don't try to use this as an argument. It's the same kind of nonsense the AGW crowd throws around. "3 out of 5 scientists agree so it must be true!"

Popularity of an idea is no way to actually judge it's merits.

Honestly they could have just asked "Was FDR a total dick? Yes, No, Kind of." and received equally useful information.

"At least this Bush admin with Paulson is doing something!"

And here it is. Doing 'something' is the standard. Not for me, but for a lot, in fact most people.

Agreed that the study questions and categories are ambiguous. Agreed that study don't constitute good evidence about which side is "right". The study does constitute good evidence that there is a significant difference of opinon between the "historian" group and the "economist" group, with the economists being, as a group, less confident of the positive economic effects of the New Deal than the historians.

Obviously, there are a number of ways to spin this fact. ("Economists are better suited to disentangle economics causes and effects.", "Historians are more left-wing.", etc.) But the fact remains.

I would be curious to read a more recent version of that survey. I bet economists would likely increase their yes to the government lengthening the depression, given the ascendancy of the RBC approach-at least if you took the survey two years ago. Today, I am not so sure.

And by the way, the RBC approach does not say that the great depression was caused by people refusing to work or taking a lot of leisure, but instead by a drop in aggregate productivity with the slowness of the recovery coming from government caused distortions in the product and labor markets. Of course what caused aggregate productivity to drop in 1929 is still a mystery.

I am unsure what to believe, but I am pretty sure that it was not deficient 'aggregate demand,' whatever the hell that really means. I also think that policies like 'destroy output to raise prices' probably did not help anyone, but policies like 'transfer money to the poor and old to help keep them from starving' were helpful. Policy uncertainty must have cost some output, and having expectations of future inflation so that people expected a return from unproductive savings (dollar bills) rather than real investments must have hurt for a while.

So, I don't know. And the correct answer is surely not a yes/no anyway.

And this blog post and ensuing discussion, children, is why no one listens to libertarians.

The real question being asked is "Will Obama's extension of FDR spending plan replicate the same results? This will only be answered in time in the same manner and in the same light as the answer to the FDR question which we all still remain in the dark. The naysayers will argue it made it worse and the proponents will say that the spending made the worse better.

The truth is that each American's (man, woman and child) share of the trillions of dollars(9+?)we are in debt totals in excess of $30,000 each. Putting us more in debt without a method of ever paying it off is a sure way of turning off the lights. China and other investors of US Treasuries at some point will not only stop investing they will ask for their money back. If the American tiger does not have the appetite to consume there really is no reason to feed the kitty.

And the current congressional suggestion to ask banks to loosen the money for loans is the reason we are in the crisis we are in. We do not have to go back to FDR to realize that our friendly politicians were the culprits that loosened the money for the real estate (2002 to 2006) business in their temporary fix to pull us out of the 2001 recession. Now those same idiots are suggesting that the banks forgive, reduce and write off those loans. They want to tax the people who were good stewarts of their money and reward the deadbeats that bought boats, motor homes, skis, desert toys that they could not afford. Those poor people were tricked in buying $400,000+ homes and bought a second, third and fourth rental with zero money down, no proof of employment, no tax returns with a teaser rate that would adjust. How did they know that they could not afford a $400,000 home with a $50,000 a year job?

FDR may have been cheerleader with an appetite of a baboon but he certainly would have followed the advise of the economists and not given a trillion dollars to bailout companies or their executives that floundered their shareholders money. And I am sure that FDR would have asked the house of representatives why they gave themselves a raise immediately after asking the auto workers to take a cut and asking the rest of the country to reduce expenditures.

Now to top it off some lawyer is asking the US taxpayer to bail out the poor rich people that lost some $50 billion dollars. How did they know that getting 15% a year from Madoff was better than the normal other investor?

God bless America and God help Obama and the rest of the world. We are in for a bumpy ride.

Sorry for the length.

"God bless America and God help Obama and the rest of the world".

No, no, no, not God Bless America, God "Bleep America".

America's chicken's have come home to roost.

I believe in the bell curve... Even if over 90% of these "economists" agreed, I would still doubt their conclusion. Economics is simply too confusing. Unless each person who voted wrote a research report where the conclusion was exactly the same, voting on a statement is a very difficult decision.

This is the kind of push-poll surveying that should be recognized as offering a silly question at best, ideological push-polling at worst. The phrase "government policies of the New Deal" is far too vague.

If FDR's programs deepened and lengthened the depression, then Bush's tax cuts also lengthened and deepened the 2001 recession.

After all, unemployment in both 1929 and 2001 increased above 4% and didn't return to 4% until 1941, and has yet to return to 4% after eight years of the Bush economic policies and tax cuts.

Of course, most people consider a recession to end when the economy returns to growth, which it did in 1933 soon after FDR took office. While unemployment remained very high for all of the 30s, the economy was growing with the GDP above the 1929 peak by 1937. FDR did cut back on government spending and sought to balance the budget at that point, just the fiscal prudence conservatives call for, and and a small recession ensued, but it was relatively short-lived and GDP growth resumed and unemployment resuming its fall.

The Bush economic policies and tax cuts haven't produced smooth and steady growth, but the two wars have generated a lot of government spending for all sorts of general and military goods. At one point, the price of plywood in the US hit record highs as the construction boom in the US and in Iraq for military bases created massive demand.

And the government spending for the Iraq and Afghanistan wars produced demand for skilled labor that had to be developed, both from the standpoint of reservists who were taken away from their jobs for more than a year, and in the industries that produce the old and new military equipment, such as the robots and UAVs and body armor and up-armored vehicles and munitions....

Funny that no one complained that the Bush administration was making unreasonable demands on the ability of government to manage projects in an emergency and too great a demand on the labor market....

Why would we care whether or not historians agree with a statement about business cycles? Should we also ask them, in addition to medical doctors, if they believe fruit juice has been a significant contributing factor to obesity

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