Monday, February 2, 2009

Two More Economists Speak Out

There's an article up in today's Wall Street Journal by two economists, one from the University of Pennsylvania, and one from UCLA titled, "How Government Prolonged the Depression." This is sure to produce sputtering rage on the left, from those for whom Roosevelt's New Deal is some sort of holy grail of government economic policy. The whole article is worth reading, but here are some key points.
the facts do not support the perception that FDR's policies shortened the Depression, or that similar policies will pull our nation out of its current economic downturn.
Why should we be wary of following in FDR's footsteps?
New Deal labor and industrial policies prolonged the Depression by seven years.
They argue that the U.S. emergence from depression by World War Two, was actually assisted by a reversal or at least weakening of key New Deal policies.
The wartime economic boom reflected not only the enormous resource drain of military spending, but also the erosion of New Deal labor and industrial policies.
So what is the main lesson they found from their New Deal research?
wholesale government intervention can -- and does -- deliver the most unintended of consequences.
That might be something to keep in mind, instead of looking to the government out of panic, dismissing any voices of caution or disagreement, and just blindly supporting big government intervention -- whether in the form of bailouts, spending packages, or any other knee-jerk reaction based on shaky theories.

1 comment:

  1. Delong refutes their arguments here. His main point is that the average number of hours worked per person was in continuous decline from the early 20th century until the 1950s. The trend goes even further back: 19th century laborers worked 3,300 hours per year on average, whereas nowadays the average is about 1,800 in the US and Japan, somewhat less in Europe and somewhat more in the East Asian Tigers.