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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.
Posted by Alex Tabarrok on January 6, 2009 at 11:23 AM in Economics, History | Permalink
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?
Posted by: StreetWalker at Jan 6, 2009 11:36:08 AM
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?
Since both obesity and economics is outside their field of expertise, I would say their judgment should play a very minor role, if any.
Posted by: JR at Jan 6, 2009 11:37:26 AM
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.
Posted by: Alex Tabarrok at Jan 6, 2009 11:41:47 AM
So half of economists *don't* think that the New Deal lengthened and deepened the Great Depression? Sigh.
Posted by: Jim Gannon at Jan 6, 2009 11:52:41 AM
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?
Posted by: michael webster at Jan 6, 2009 11:58:33 AM
It strikes me that this survey question is very poorly worded, and almost deliberately designed to push ideological buttons rather than to stimulate a serious inquiry about economic policy during the 1930s. A distinction should be made between the policies most people associate with the "New Deal" and the general conduct of macroeconomic policy. For example, the Roosevelt recovery record would look very different if there hadn't occurred the severe recession of 1937-1938, which cost the U.S. at least two years of growth. Absent that, the U.S. might have entered the war much closer to full employment. Now, that recession was certainly the result of mistaken contractionary fiscal and monetary policies for which the Roosevelt administration must bear responsibility. I just don't know what was specifically New-Dealish about gold sterilization, raising bank reserve requirements, and raising taxes and cutting spending to balance the budget.
One unfortunate aspect of this controversy is how what should be a dispassionate scientific inquiry becomes distorted by ideological motives. Conservatives want to attack the "New Deal" record as a way of tarnishing a liberal hero (FDR), liberals want to do the opposite. The truth is almost all professional economists of the present time would agree that their predecessors of the 1930s lacked an accurate model of the economy, or an adequate understanding of the operation of fiscal and monetary policy. That being so, it's hard to blame politicians who had no better source of advice. (This applies also to the much-maligned Hoover, some of whose policies were constructive, if ultimately ineffectual). Most other countries floundered around in dealing with the Depression. Sometimes following good policies was more the result of luck than design. The UK was able to recover by abandoning the gold standard, but that was hardly a choice, it was forced off!
My own take on the Roosevelt recovery record is that he got a lot of things wrong, but he got one big thing right. At a time when there was still an ongoing debate between followers of conventional laissez-faire policies, and various schools of "expansionists", he followed the expansionists.
Posted by: Phil P at Jan 6, 2009 12:07:02 PM
For all this libertarian FDR bashing, I would remark FDR had a relatively high approveal rating among people who actually lived during those years.
Posted by: Tom at Jan 6, 2009 12:23:33 PM
I have never studied the Great Depression. Nevertheless, for those that have as for me, Whaples' question appears unanswerable. He asked for a comparative answer without specifying what we should compare against.
So economists tossed off an answer that the New Deal lengthened and/or deepened he Depression as against some notion of optimal policies; and the historians made their comparisons with preceding polices or policies in other countries?
What comparison does Tyler have in mind?
Posted by: David Heigham at Jan 6, 2009 12:42:21 PM
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/
Posted by: Superheater at Jan 6, 2009 1:05:15 PM
"For all this libertarian FDR bashing, I would remark FDR had a relatively high approveal rating
among people who actually lived during those years."
So what?
Posted by: AdamBaum at Jan 6, 2009 1:10:24 PM
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!
Posted by: dissent at Jan 6, 2009 1:20:04 PM
FDR was certainly a good politician for those who lived then, with his fireside chats and all. I would compare to the (hopefully) hypothetical case of Obama getting elected and the US subsequently floundering like 1990's Japan. Even if we have persistent high unemployment over the next four years, people will still like Obama for his oratory skills and giving us "hope." The persistent poor economic conditions would just be the result of the failure of the free market, with no blame attributed to government policies at all.
Posted by: MW at Jan 6, 2009 2:14:40 PM
"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?
Posted by: MW at Jan 6, 2009 2:17:05 PM
Since when has popularity decided what libertarians think? Not in a long time, if ever. I think that is the whole point. In fact, for me, when something is popular, I tend to look what is happening in the opposite direction.
FDR was probably popular with the masses who needed jobs and bread money, but probably not so popular with the miniscule minority of people who create real economy jobs and wealth.
Posted by: Andrew at Jan 6, 2009 2:26:44 PM
But how many of them believe that the New Deal was beneficial apart from the disastrous attempt to reestablish the gold standard?
Posted by: green apron monkey at Jan 6, 2009 2:34:03 PM
In fact, for me, when something is popular, I tend to look what is happening in the opposite direction.
Yeah I used to do that too.. between twelve and sixteen though. Then I grew up. Now I judge everything on its own merits, instead of being a standard nay-sayer.
Posted by: JSK at Jan 6, 2009 2:35:11 PM
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?
Posted by: Miako at Jan 6, 2009 2:36:50 PM
I'm guessing the right time to re-establish a gold standard is when the bubble is inflating, when noone wants to hear it.
Posted by: Andrew at Jan 6, 2009 2:42:54 PM
(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.
Posted by: Andrew at Jan 6, 2009 2:48:26 PM
Nice example of "political numbers". The numbers as published "feel" very different:
A P D
E 27 22 51
H 6 21 74
E= economists H= historians A = generally agree P = agree-but with provisos D = generally disagree
Posted by: be aware at Jan 6, 2009 2:50:30 PM
Well, something prolonged it. The Depression didn't end until WWII for god's sake. Would it ever have ended otherwise?
Posted by: Al Brown at Jan 6, 2009 2:52:07 PM
That study is odd, because there are three answers - essentially a yes, a no, and a middle. But Qs are worded and answers interpreted so that yes + middle are both grouped as "agrees".
Combine this with the above mentioned uncertainty of what the question is really asking - composite of FDR's policies and actions or the part more popularly remembered as the "New Deal"? - and it's hard to figure out what's going on here.
My guess from the data would be that the vast majority of pure historians don't understand the complex monetary aspects with eg the gold standard, and if they let ideological bias get to them it will be liberal. Thus the vast majority of them stand by FDR.
Around a quarter of economists believe FDR was bad on almost all fronts - Amity Shlaes'/the libertarian hypothesis. Another substantial batch are pretty neutral on the majority of the popularly remembered "New Deal", but think FDR's playing with the gold standard caused havoc; this group probably cuts across both the "agree with provisos" and even some of the outright "disagree", who are taking the question as regarding the pure libertarian hypothesis. And then somewhere between a quarter and half (depending on how many are registering as disagree when it's really more like "disagree with provisos"), I'd guess about a third, think FDR made some mistakes but overall was highly positive compared to any other alternative on offer at the time.
Posted by: DCM at Jan 6, 2009 3:15:27 PM
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.
Posted by: spencer at Jan 6, 2009 3:27:22 PM
FDR was certainly a good politician for those who lived then, with his fireside
chats and all.
I asked my 96 year old (still sharp) grandmother. She said "there wasn't much
else to do but listen to the radio and FDR never stopped the railroad from
"laying off" your grandfather.
Then again, she knows politicians are generally like diapers: location and content.
Posted by: Phil at Jan 6, 2009 3:43:57 PM
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.
Posted by: Scott Ferguson at Jan 6, 2009 3:44:30 PM
