Monday, April 27, 2009

Revisionist Views On the New Deal

I’m agnostic about whether the New Deal did anything to alleviate the depression. For what it’s worth, my thinking has gotten more open-minded on this issue: 20 years ago I would’ve regarded this as a heresy.

The April 4 issue of The New York Times reported on a conference that revisited the economic interpretation of the history of the Great Depression.

… Critics of the New Deal credit Roosevelt with some important innovations, like restoring confidence in banks and establishing social insurance.

The big problem was busybodying:

When the federal government keeps changing the rules, it’s like having Darth Vader in control, John H. Cochrane, a professor of finance at the University of Chicago Booth School of Business, said during a panel. “I have changed the deal,” he intoned like Vader, the “Star Wars” villain. “Pray I don’t change it any further.”

Cochrane is another guy on everyone’s medium list for a Nobel Prize.

Two more points probably sound like something I could’ve said in class – first, that a lot of people lack perspective:

To ask at what point on the 1930s timeline the United States is right now, Harold L. Cole, an economics professor at the University of Pennsylvania and a consultant to the Federal Reserve Bank of Philadelphia, said with some exasperation, “really shows a misunderstanding of the severity of what went on there and the depths of the crisis.”

Secondly, that perhaps we try too hard:

Mr. Vedder playfully offered another analogy: the recession of 1920. Why was that slump, over and done with by 1922, so much shorter than the following decade’s? Well, for starters, he said, President Woodrow Wilson suffered an incapacitating stroke at the end of 1919, while his successor, Warren G. Harding, universally considered one of the worst presidents in American history, preferred drinking, playing poker and golf, and womanizing, to governing. “So nothing happened,” Mr. Vedder said.

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