posted
You should read more closely. Aside from the fact that both plans are meant to help the economy, the philosophy and policy behind Obama's plan is not that similar to Roosevelt's. Roosevelt's plan savaged consumer demand, because he essentially believed in an artificially planned economy, in which competition for jobs and for sales would have no effect on prices (because he believed that low prices were responsible for the slow economy).
Obama is not going in that direction. It's a stimulus, but not the same kind of stimulus. This has also been talked about with the "Lost Decade" in Japan, in which the government came in with over-regulation too late to save the bubble from bursting, and just in time to make sure business couldn't go on as usual. Do you really think Obama has no advisers who are aware of the negatives of the New Deal? Because this has been endlessly discussed in recent years, and many many economists are aware of the drawbacks.
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posted
Also, there is hardly a consensus that that is even a true statement at all. Most people don't believe it at all, and of those that do they don't agree on how much it helped vs how much it hurt.
Basically, it's an excuse, and not one that is widely believed.
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The thing about the New Deal that is most important to remember is that it did not stop the great depression, that "honor" fell to WWII, but what it did do was cushion the fall and help FDR to save capitalism. Capitalism would have died in 1933 had it not been both for the reassuring presence and leadership FDR provided and for the cushion that the alphabet soup of programs FDR created provided for millions around the country. However, I think it is important to know that without WWII, the depression may have last much longer because the programs FDR created were not large enough to really save the economy.
I think too that that is what Obama is hoping to do, he knows that this stimulus may not be responsible for the economic recovery, which it won't (you cant put less than 1/30th the amount of our entire economy as capital into the economy and expect it to recover--WWII required 2/3rds of our economy and massive injections of capital for the war effort), but what he is hoping is that it cushions the fall. And I think this stimulus bill will do so, though it has far too many tax cuts, far too little spending, and wasteful democratic spending that is less likely to help the economy in any meaningful way, at least so that we do not fall into a depression.
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posted
I do not think very well of my investment theory professor this semester, but one thing he says does make sense.
He says the reason Japan failed to recover more quickly is that they did not really get rid of the "bad banks", and that we are doing the same thing. Several articles I've ready lately in the WSJ indicate a surprisingly large amount of graft in deciding which banks are saved instead of it being based on which banks SHOULD and NEED to be saved.
On the other hand, I'm not sure what to make of this article about FDR. Part of me wants to say "If it wasn't a good idea, why has it been so revered from the last seven decades?". Yet, we know that historically some of the worst decisions are popular at first. Still, the evidence they've seemed to gather doesn't really seem very concrete. They are claiming to be able to predict what WOULD have happened? I'm just not confident in those outcomes. One of the biggest problems in predicting what WILL happen is that economics (like weather) is almost fractally complex. We don't even really know all the variables. It seems likely to me that in some of their predictions they're including variables that they believe to be "natural occurrences in the market" that very well could have been influenced by the New Deal in invisible ways. I don't think we need to crucify him just yet.
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posted
Whether is policies were a net benefit or not is at least a little up in the air, but yes, a good number of his policies were extraordinarily harmful to the economy. Of course, we knew a lot less about how economies worked then; most of the worst would not happen today.
I personally suspect they were harmful, though I doubt they added seven years. Finding such a strong counterfactual given the messiness of data and models is suspect.
DDDaysh: while weather is very hard to predict beyond a short period, we have very good models for explaining weather that is past, so that isn't a very good example
As for Japan's policies, the basic idea is right: the banks (and certain other businesses) weren't forced to move losses on balance sheet that should be there, and thus things didn't sort themselves out. That greatly speeded recovery. Of course, we're making a similar mistake now, and a 'bad bank' would be counterproductive.
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As far as prolonging the depression, another theory has it that FDR's stimulus was both too small and too short (soon after he decided to balance the budget and so raised taxes).
quote:FDR's "Stimulus Plan" worsened the Great Depression
quote:A 1995 survey of economic historians asked whether "Taken as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression." Of those in economics departments 27% agreed, 22% agreed 'with provisos' (what provisos the survey does not state) and 51% disagreed. Of those in history departments, only 27% agreed and 73% disagreed.
TEACH THE CONTROVERSY
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posted
Most would indeed call a 50-50 split a controversy. Historians are mostly not qualified to speak to the question, so that bit is irrelevant.
Also, given the statement, the 'disagreed' side would also include anyone who thought they had no particular effect, so it is quite possible there are more economists who think the policies as a whole had a negative effect than there are those who think they had a net positive effect.
And I shall point out again what I pointed out the last time that quotation was given: they asked about net effect; pretty much all economists agree that a good number of the policies had negative effects, the disagreement is over whether other policies had positive effects sufficient to balance those negative effects or not. At least this time the quotation is not being used to 'disprove' that statement.
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Of course, you probably have to throw out any of those people who subscribe to the austrian school, since that school of economics rejects empirical modeling. Which basically means they don't actually have grounds to say that the policies made anything better, or worse. From an austrian economist, opinion on whether or not any particular policy had any particular effect should have exactly as much weight as mine... that is, virtually none. And if we're comparing their opinions to the opinions of people who actually believe that we understand economics in a scientific way, its an invalid comparison.
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The lack of statistical models does not imply a lack of a studied analytical framework. There are many schools of analysis where study can lead to greater insight, but numerical analysis is not the primary mode. Large parts of the humanities, notably. Does your opinion on Blake's poetry rate equally with the analysis of someone who has spent a career studying Blake's poetry?
Of course, since I'm not an Austrian, I generally agree that mathematical models of economics can be of great help in understanding events. The fundamental insights tend to not be particularly mathematical, though, and many of the ones being found useful today come from prominent Austrians such as Hayek (who is sadly much misunderstood).
And, also of course, very few economists (in the sense the people with the survey probably meant, and surveyed) would be members of the Austrian school, so this is just a side amusement.
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quote:Originally posted by fugu13: Most would indeed call a 50-50 split a controversy. Historians are mostly not qualified to speak to the question, so that bit is irrelevant.
I think you misread the quote. All of those polled were economic historians, just some were in the econ departments and some in the history departments. One would hope that economic historians have a fair grasp of economics (and some history).
The unfortunate thing about this poll (at least as far as the current stimulus debate goes) is that both economists who are prima facie against stimulus and economists who think that FDR stopped stimulating and raised taxes prematurely would have agreed with that statement, so it is not terribly informative.
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posted
"The lack of statistical models does not imply a lack of a studied analytical framework. There are many schools of analysis where study can lead to greater insight, but numerical analysis is not the primary mode. Large parts of the humanities, notably. Does your opinion on Blake's poetry rate equally with the analysis of someone who has spent a career studying Blake's poetry?"
See, the problem when you throw out modeling, is that you can't say anything outside of what you're focusing on. So, someone who spent a career studying Blake's poetry would have exactly the same level of insight into poetry written by Nash as I would (plus or minus a little bit). And I think thats what you get when you ask an austrian school economist about a specific policy or set of policies.
This survey also isn't really that interesting, in that there's so many different peices of what FDR did. Many of them worked, many of them didn't.
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natural_mystic: No, most economic historians on the history side of things have no background in economic modeling to speak of. They tend to avoid modeling even more strongly than the members of the Austrian school Paul is railing against (who often do it implicitly). They also specialize far more, and you'll find strangely large numbers of them focus on things like transitions in practices of village organization in the middle ages. So no, I wouldn't consider their opinions on the subject very much.
Paul: someone who does modeling and hasn't modeled (or read papers on models of) the great depression isn't going to have any great insight, either. And, more than in poetry, a lot of the insights in economics (at least economics involving last few centuries) are somewhat portable, so yes, I'd expect a good Austrian economist who has spent several months or so studying the great depression to be far more qualified to comment on its economics than you with comparable time.
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quote:Originally posted by fugu13: Historians are mostly not qualified to speak to the question, so that bit is irrelevant.
What? What's your reason for saying this? Historians don't study economics? Better yet, historians aren't informed on an important aspect of history? I'm sorry- that's a big leap. History and economics go together just like art and history, and for that matter, art and economics. All the subjects interrelate. One wouldn't be much of an historian without a thorough grounding in economics. And I think we're talking about the subset of historians who do study the depression, which would require an understanding of the economic questions involved.
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posted
I think his point is comparable to saying that studying the history of math doesn't necessarily make one capable of proving a complicated math theorem.
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quote: The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages.
The math is a bit weird because it assumes that much of the loans/guarantees via the FDIC or Fed are total losses. But still, thats a pretty amusing number.
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posted
fugu, if you can show me how anything done by austrian economists is anything other then post hoc hokum, then I'll get interested. But, to me, what they do is basically rationalizing what happened based on their own pet hypotheses of human nature, with the underlying belief that government intervention is always bad guiding all their examinations of policy. So, no, I think I can do a better job figuring out the depression with four months of study then an austrian economist could with a lifetime... because his study will consist of one event of confirmation bias after another.
On the other hand, people who play with models end up with a good sense of what is and isn't likely to affect the outcome of something they haven't modeled.
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posted
Try reading some of the stuff Hayek won the Nobel prize for.
edit: and you'll have a hard time showing he was against all government intervention, as he supported government-funded social safety net programs, like many Austrians do. You seem to be arguing against a caricature, and not any real understanding of what major Austrian thinkers have or have not supported.
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quote:But, to me, what they do is basically rationalizing what happened based on their own pet hypotheses of human nature, with the underlying belief that government intervention is always bad guiding all their examinations of policy. So, no, I think I can do a better job figuring out the depression with four months of study then an austrian economist could with a lifetime... because his study will consist of one event of confirmation bias after another.
That's pretty much Austrian economics in a nutshell (hang around lewrockwell.com much?), but Hayek isn't total borkum and had some impressive insights into how markets could spontaneously order themselves.
That said, austrian economic thought ate it in this last crash and most likely won't be making inroads back into national workings. Hello, keynes.
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Samp: Austrians were among those most anticipating issues due to gov't interventions in housing and credit, especially the former, so while many in politics are distancing themselves, I don't think that reflects any real refutation (though I don't buy into a lot of Austrian economics, some of its great ideas are very important).
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quote:Originally posted by fugu13: natural_mystic: No, most economic historians on the history side of things have no background in economic modeling to speak of. They tend to avoid modeling even more strongly than the members of the Austrian school Paul is railing against (who often do it implicitly). They also specialize far more, and you'll find strangely large numbers of them focus on things like transitions in practices of village organization in the middle ages. So no, I wouldn't consider their opinions on the subject very much.
In no particular order: 1)Both sets of economic historians would have had some formal training in economics, so both polls represent 'informed' opinions. Of course, these opinions are less informed than if they had restricted solely to Great Depression specialists.
2)Whether or not the historians actively engages in modeling is beside the point; the question is whether they have read and formed an opinion about others' use of models. They are well qualified to evaluate the reasonableness of assumptions etc even if they cannot follow the maths. Further, they can read and evaluate criticisms of this approach from other economists.
3)There is no reason to think that economic historians in economics departments are more likely to specialize in the Great Depression than those in the history departments.
4)I can't speak to the econ/hist boundary, but my experience with the phil/hist and elec/math boundaries suggests that there is a certain serendipity about which side of the boundary one ends up on.
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posted
Economics professors get paid a lot better than history professors, on the whole. This brought a lot of the people doing economic history capable of making large insight into economics into economics departments. Many of those left in history departments (and there aren't all that many) are proponents of 'heterodox economics', which often means they have no formal training to speak of in economics, but like slamming the discipline, and neither read nor are read by most economists (including economic historians).
Not that there aren't some very astute economic historians in history departments; that, however, is the exception rather than the rule.
And I'm not asserting that they just have a different set of specialties, but that they tend to be more specialized, period, in ways that tend to make them less able to assess (in particular) more modern situations (since many of those specialties are in the distant past, while modern economics is mostly about periods with modern institutions).
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quote:Originally posted by natural_mystic: 1)Both sets of economic historians would have had some formal training in economics, so both polls represent 'informed' opinions. Of course, these opinions are less informed than if they had restricted solely to Great Depression specialists.
2)Whether or not the historians actively engages in modeling is beside the point; the question is whether they have read and formed an opinion about others' use of models. They are well qualified to evaluate the reasonableness of assumptions etc even if they cannot follow the maths. Further, they can read and evaluate criticisms of this approach from other economists.
3)There is no reason to think that economic historians in economics departments are more likely to specialize in the Great Depression than those in the history departments.
4)I can't speak to the econ/hist boundary, but my experience with the phil/hist and elec/math boundaries suggests that there is a certain serendipity about which side of the boundary one ends up on.
1. What do you define as "formal training in economics?" An undergraduate who's taken Econ 101 has some formal training in economics. That doesn't mean I'd consider their opinion on economics valuable.
2. How do you know this is true of historians of economics in the history department? In my anecdotal experience, it's not.
3. But there is reason to think that the way economic historians in the economics department have been trained will give them insight into the Great Depression even if that isn't their specialization, while there's no reason to believe that of people who are first & foremost historians.
4. If someone is employed in an economics department, they almost certainly have a Ph.D in economics, which means they've been formally trained in the principles of the field - I can only think of three or four programs in the entirety of the US where the first year of Ph.D studies in economics is outside of the orthodox tradition. It is almost certain that someone in a history Ph.D program cannot do the first year of an economics graduate program. Which is the training I speak of in point 3.
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quote:Originally posted by Samprimary: That said, austrian economic thought ate it in this last crash and most likely won't be making inroads back into national workings. Hello, keynes.
God, I hope not. I can't see why Austrian economic thought should have been done in by this last crash. The crash wouldn't have happened if they'd been listened to.
Advocates of the Austrian school said, "Don't let the Fed lower interest rates, or the situation will simply get worse." They lowered interest rates, and the situation got worse. The Austrians said, "Let bad businesses die; propping them up will make the inevitable crash worse." They propped them up. The crash has grown worse.
When you manipulate the economy artificially, you create a situation in which people can very easily take advantage of things. Because they can base their decisions, not on what's reasonable, but on how they can game a gameable system. Which is only gameable, at least to the degree ours is, when a central bank plays games.
So yes, when you have an artificially manipulated economy, you need more regulation. If you don't artifically manipulate the economy, regulation of that sort isn't necessary. But TPTB decided to take the part they liked (less/no regulation) and ignore the part they disliked (paws off the economy), and everything went to hell.
Now the same dopes who thought they could have their cake and eat it to want to blame the lack of regulation for the problem, rather than accept the blame for fiddling with the economy and thereby maiming it.
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quote:Originally posted by Paul Goldner: fugu, if you can show me how anything done by austrian economists is anything other then post hoc hokum, then I'll get interested.
So all the very loud and public warnings that continuing to lower interest rates would harm, rather than help, the economy... that's all post hoc hokum? I have to find out where I can borrow one of their time machines.
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quote:Originally posted by Jhai: 1. What do you define as "formal training in economics?" An undergraduate who's taken Econ 101 has some formal training in economics. That doesn't mean I'd consider their opinion on economics valuable.
2. How do you know this is true of historians of economics in the history department? In my anecdotal experience, it's not.
3. But there is reason to think that the way economic historians in the economics department have been trained will give them insight into the Great Depression even if that isn't their specialization, while there's no reason to believe that of people who are first & foremost historians.
4. If someone is employed in an economics department, they almost certainly have a Ph.D in economics, which means they've been formally trained in the principles of the field - I can only think of three or four programs in the entirety of the US where the first year of Ph.D studies in economics is outside of the orthodox tradition. It is almost certain that someone in a history Ph.D program cannot do the first year of an economics graduate program. Which is the training I speak of in point 3.
The context of my comment was responding to the claim that historians are not qualified to speak to the question. In particular, I claim that the poll results for the economic historians in history departments is significant reflecting, as it does, educated opinions.
1. I assume the formal training of economic historians extends to at least having critically read foundational economic texts and secondary work putting it into context.
2. Which part of 2) does your anecdotal evidence address, and what is this anecdotal evidence?
3 + 4. This is a poll trying to get a sense of the 'conventional wisdom' of groups that have some knowledge of the ongoing debate and literature on this issue and are capable of making an educated assessment of it. The fact that someone does not have the quantitative tools to construct a model does not mean that they cannot understand the underlying assumptions, see whether the output of the model really agrees with the paper's thesis or read criticisms by other economists. Specifically addressing your (3), the question would be would their training give them any new insights that have not already been written in intelligible enough form that a history dept. econ. hist would be able to understand? Further, would they have put the poll-taker on hold while they feverishly make new original insights?
It's also reasonable to think that one gets a more honest answer from the history dept. economic historians given they carry less ideological baggage (see the Fresh water vs. salt water debates).
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