*The Midas Paradox*

That is the forthcoming book by Scott Sumner, and the subtitle is Financial Markets, Government Policy Shocks, and the Great Depression.  Here is one of Scott’s brief capsule descriptions of the book:

I will show that if we take the gold market seriously we can explain much more about the Great Depression than anyone had thought possible.  Three types of gold market shocks generated much of the variation shown in Table 1.1: changes in central bank demand for gold, private sector gold hoarding, and changes in the price of gold.  The remaining output shocks are linked to five wage shocks that resulted from the New Deal.  This is the first study to provide a comprehensive and detailed look at all high frequency macro shocks during the Great Depression.

I would stress that Scott devotes far more attention to asset price reactions than do many other studies of economic history; that is perhaps his main methodological innovation, in addition to the economics.

Scott also insists — correctly in my view — that the artificially engineered real wage increases of the New Deal were a true disaster.  This point is underemphasized in most competing accounts, or perhaps even actively denied by many Keynesians.  Yet the evidence here is overwhelming.

This is a very good book, one of the best on the economics of the Great Depression ever written.


Comments for this post are closed