tag:blogger.com,1999:blog-4900303239154048192.post8377434670546685698..comments2024-03-06T06:34:42.881-05:00Comments on EconoSpeak: Is 1921 A Role Model For Modern Macroeconomic Policy?Unknownnoreply@blogger.comBlogger12125tag:blogger.com,1999:blog-4900303239154048192.post-19431789751719260312014-12-03T13:29:55.972-05:002014-12-03T13:29:55.972-05:00Thanks, Bruce.
media,
On Samuelson's silly c...Thanks, Bruce.<br /><br />media,<br /><br />On Samuelson's silly column, see my post about it just a few before this one. I think I make pretty good mincemeat of it.rosserjb@jmu.eduhttps://www.blogger.com/profile/09300046915843554101noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-16572812943492729992014-12-03T12:04:30.148-05:002014-12-03T12:04:30.148-05:00This is irrelevant but here we go
1. My mom now l...This is irrelevant but here we go<br /><br />1. My mom now lives with her old college friend (u chicago)---he was the son of a small town banker, she was from a family associated with the most elite one room unheated unelectrified school house in n dakota (and they lost their 40 acre homsestead eventually to the bank) . They both go to Obama's church in hawaii (he moved there cuz he had a chance to experience warm weather year round). He manages stocks for others and gets Grant's newsletter. I looked at it when i visited (payed my way too) in between falling off hawaii's mountains---he was advocating buying cigarette stocks last one i saw.<br /><br />2. I saw a Samuelson column recently (at thanksgiving since i dont get newpapers) (some people think he is the ex-MIT economist who had some nice papers in PNAS in the 70s and random walk i thought was ok). He said according to a new OECD report the US is number 2 after France in terms of being the biggest 'welfare state'. My view is that means he is talking about himself---write a paragraph once a week and get paid in full. I just wonder how they do these calculations. Medicaid for example i think is treated as income, but it may go in your pocket and then go right out into the health care system's pockets, which often are unequal---nurses and technicians i met were often complaining and such, but that might not be the case for JHU adminstrators and others who just bought the hospital . (Of course they redistribute some to dope addicts in Mobtown (B(e)More!)willing to work as guinea pigs (i used to do that until i realized i had imprinted wrongly in school, and was actually a hamster better suited to spinning wheels). 'please prove you're not a robot'Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-55333746361528037042014-12-03T02:46:14.376-05:002014-12-03T02:46:14.376-05:00Barkley Rosser makes an important point, highlight...Barkley Rosser makes an important point, highlighted in his subsequent comment, regarding the relationship between falling wages and employment.<br /><br />One thing I've never understood about the Ohanian argument regarding the Great Depression is how a period of high unemployment and falling wages was going to get the economy to full-employment, if the only full-employment equilibria available were at higher wages and labor incomes in manufacturing industry. Unemployment is an unrelenting pressure in the wrong direction, at least for the 1930's.<br /><br />I think it is at least somewhat plausible that, after the run-up in wages (and farm incomes) during WWI that subsequent peacetime full-employment equilibria were available at lower wage levels in the return to normalcy.<br /><br />In any case the policy in 1921 was a political decision to redistribute income at labor's expense. And, the subsequent choice to offer cheap credit rather than wage increases as a means of creating effective demand for the expanding industrial output of the 1920s New Economy contributed to the conditions that made the debt-deflation of the Great Depression possible.<br /><br />In the context of the 1930s, a critical problem was that the only conceivable full-employment equilibria were probably at a <i>higher</i> industrial wage level. High unemployment is a blunt policy instrument pressing down wages, when all the solutions require higher wages. Reducing wages was not a feasible path to growth or full-employment in the 1930s U.S.<br /><br />It is a significant tell, I think that the con-men selling the 1921 model like to refer to the subsequent boom of the 1920s, as if there was one. In fact, the 1920's U.S. economy was highly unstable:there would be two more business cycles completed between 1921 and 1929; it was a very bumpy ride, despite the proliferation of the revolutionary technologies of the New Economy of autos and electricity and mass-production processes and agricultural revolution.Bruce Wilderhttps://www.blogger.com/profile/09631065564839959376noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-18941781627087039562014-12-02T15:27:35.166-05:002014-12-02T15:27:35.166-05:00Not only was Hoover Commerce Secretary under Hardi...Not only was Hoover Commerce Secretary under Harding, he was also chairman of Harding's Conference on Unemployment that proposed a full range of <a href="http://econospeak.blogspot.ca/2014/11/remedies-are-made-of-this-cornmeal-and.html" rel="nofollow">"remedies for the business cycle"</a> including unemployment insurance, counter-cyclical spending on public works, improved economic statistics and responsive monetary policy. <br /><br />The conference report, edited by Wesley C. Mitchell, could even be regarded as somewhat of a prophetic blueprint for the New Deal policies of <a href="http://econospeak.blogspot.com/2014/11/public-works-economic-stabilization-and.html" rel="nofollow">public works and economic stabilization</a>.<br /><br />This history raises the question of to what extent the "signaling" from the Harding Conference may itself have been an element in the restoration of business confidence. Sandwichmanhttps://www.blogger.com/profile/11159060882083015637noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-66877195026217752862014-12-02T13:55:35.535-05:002014-12-02T13:55:35.535-05:00A "monetary history" of the period:
http...A "monetary history" of the period:<br />http://thefaintofheart.wordpress.com/2014/11/08/just-as-mental-depressions-economic-depressions-require-treatment-and-better-can-be-avoided/João Marcushttps://www.blogger.com/profile/13658264244033012660noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-29585863771538201212014-12-02T13:35:16.256-05:002014-12-02T13:35:16.256-05:00Thanks, Nick.
Hope you did not lose too much mone...Thanks, Nick.<br /><br />Hope you did not lose too much money paying attention to Grant, Shaun P.rosserjb@jmu.eduhttps://www.blogger.com/profile/09300046915843554101noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-84338940282173330382014-12-02T13:21:29.783-05:002014-12-02T13:21:29.783-05:00Barkley and PGL: good posts. I decided to add my t...Barkley and PGL: good posts. I decided to add my twopenceworth:<br />http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/12/stabilising-deflation-under-the-gold-standard.htmlNick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-39325720673280209092014-12-02T12:33:27.490-05:002014-12-02T12:33:27.490-05:00There was a time when I really found Grant persuas...There was a time when I really found Grant persuasive. I subscribed to his newsletter for years, but I finally woke up eventually when I became more knowledgeable. The guy is a con man and one of the smartest morons you will ever read. You will lose lots of money if you take his advice. ShaunPhttps://www.blogger.com/profile/08360992511664194043noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-69230012063027615192014-12-01T14:46:08.479-05:002014-12-01T14:46:08.479-05:00I have to add two more things. One is there in my...I have to add two more things. One is there in my post, but I want to really stress it. Both new classical and new Keynesian DSGE models contain assumptions that if wages were to fall, full employment would be maintained, more or less. They even misrepresent Keynes as having made this the basis of his theory, which he most certainly did not. So, the fact that the UR shot up to 15.3% when wages and prices were allowed fo fall sharply really gives the lie to something that is just asserted and assumed repeatedly all over the place. <br /><br />The other is that Herbert Hoover really does come out looking not so bad, partly thanks to all these people who think that 1921 was the way to go criticizing him. In fact, he was Commerce Secretary under Harding, and while it has not been widely advertised (supposedly there was no fiscal stim in 1921), by the end of 1921 there was in fact an increase in public works spending coming down that was driven by Hoover. So, the bounceback from the 1921 decline was aided by both fiscal and monetary policy stimulus, which you do not hear from Grant or any of these others.<br /><br />Indeed, Hoover attempted fiscal policy after 1929, mostly for investment in airports and dams (they do not call it the Hoover Dam for nothing), but he was somewhat held back by Congress, and, ironically, FDR criticized him for his deficit spending and ran on a balanced budget platform, much as did Reagan in 1980, only to abandon it once in office as did Reagan. This is all a bit more complicated than many like to acknowledge.rosserjb@jmu.eduhttps://www.blogger.com/profile/09300046915843554101noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-4049722304561948092014-12-01T14:39:43.649-05:002014-12-01T14:39:43.649-05:00pgl,
You are on the money, so to say. The argume...pgl,<br /><br />You are on the money, so to say. The argument by the "1921 is the model!" gang really focuses on the period before 1931. It is indeed true that Herbert Hoover resisted calls for wage declines, and Lee Ohanian has been the academic who has probably most strongly made the case that this was important in aggravating the GD. But indeed there was actual deflation during the GD, if not as severe as the sharp decline in 1920-21 that was then partly undone in the bounceback.<br /><br />However, needeless to say, even Ohanian, and certainly people like Grant, ignore the other things that were going on after 1929 that were not going on during the earlier episode. In particular, other nations were going into sharp declines, largely triggered by the tight money policy in the US under the rules of the gold standard, long the argument of Barry Eichengreen and Charles Kindleberger. This all came to a head in 1931 with the crash of the Creditanstalt bank in Vienna in May 1931, which triggered the ultimate wave of bank failures of all time that moved across the globe, from eastern Europe through Germany and France and Britain, finally reaching the US at the end of the summer. This is why Friedman and Schwartz pinpointed September of that year as the critical moment. The Fed should have loosened its monetary policy all the way, but it basically did nothing, continuing an essentially tight policy, with the result being a massive wave of bank failures (with no FDIC to pay depositers for their lost savings), and the truly horrific plunge into the Full depths of the Great Depression. The whole downward wage stickiness simply falls by the roadside in the face of that catastrophic event, which indeed, Ben Bernanke knew about and set out to avoid in 2008-09, and why he promised Friedman face to fact that under him there would be no repeat of 1931.rosserjb@jmu.eduhttps://www.blogger.com/profile/09300046915843554101noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-18891025088935589782014-12-01T13:46:27.549-05:002014-12-01T13:46:27.549-05:00There is something else bizarre about this Grant t...There is something else bizarre about this Grant thesis that we allowed price deflation in 1921 but not during the Great Depression. Note that from 1913 to 1920, the CPI (base early 1980's = 100) doubled from circa 10 to circa 20 by 1920. During the next couple of years, the Federal Reserve tight money had it drop from 20 to 17 where it stayed until 1929 (tight money ended as you noted). From 1929 to 1933, the CPI dropped from 17 to 13. So what is Grant talking about when he says we did not try deflation. And Friedman and Schwartz noted, monetary policy was too tight. And we got the Great Depression. Yes FDR changed monetary policy as well as fiscal policy and for the next 4 years, we saw recovery. Yes that ended in 1937 when FDR took the fiscal austerians advice - unfortunately. ProGrowthLiberalhttps://www.blogger.com/profile/17138489390594441753noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-33150274970089730282014-12-01T12:39:59.746-05:002014-12-01T12:39:59.746-05:00I'm a bit new to the history of what really ha...I'm a bit new to the history of what really happened in 1920-21 but as I catch up, it does seem Krugman was writing about this in April 1921 and Daniel Kuehn had an interesting paper back in the fall of 2010 (see my update). I guess neither Grant nor RJ Samuelson bothered to read this research before writing their nonsense. Your post adds to the discussion. ProGrowthLiberalhttps://www.blogger.com/profile/17138489390594441753noreply@blogger.com