Yesterday, Paul Krugman had another quick post on Harding and the 1920-1921 depression. It's been odd how the timing on his posts has worked - last time he commented on it, my RAE article just came out, so I sent it to him and he linked to it. This time, too, he posted shortly after my CJE article came out, so I sent that to him as well, and then I got another link!
I suggested if he was short on time he scroll down to the figure - I thought he'd like that.
I do want to clarify something on the passage he cites. It makes it sound like I may even think that post-war austerity caused the 1920-21 depression. That was certainly something you heard at the time (and a big part of the reason why a few people thought there might be a depression after WWII). I don't actually think it's quite that simple, myself - and I don't want people to be thrown by the passage Krugman cited. In my opinion Christina Romer (1988) has amply demonstrated that demand shocks had little to do with the 1920-21 depression. I agree. What I think is reasonable to say is that the sort of demand shock implicit in the rapid demobilization might have made things a little worse than they would have been to boot. That was really the intention of that passage.
Certainly if fiscal austerity was an important determinant of recovery, as some claim, the deep cuts of the Wilson administration should have prevented us from ever falling into the 1920-21 depression in the first place!
Monday, January 23, 2012
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I read what you said in this post twice now. Are you repudiating what Krugman said about what you said or not? I ask because enemies of Krugman will leap on it, and your comment as it stands will cause you headaches in the future.
ReplyDeleteIB
I wouldn't say repudiating - I would say clarifying.
ReplyDeleteNote that he doesn't provide any interpretation of "what this passage says about what caused the depression" at all. So there's nothing to "repudiate". I completely agree with what he does highlight about it - that the real austerity came before the depression even began, and austerity is a weak thing to point to in trying to understand why things recovered.
I just want to clarify that that passage is not saying "this depression is first and foremost a demand-side, traditional Keynesian recession".
I'm getting sick of this "leaping on it" and this Krugman exegesis. If that happens, I'm just going to tell them to read both of my articles. I think I'm more than clear about what I think.
ReplyDeleteI don't think I've vanquished ABCT or austerity.
I don't think I've shown that Harding is awful.
I don't think I've vindicated fiscal policy.
I don't think I've done much more than apply what we already know about the depression, plus some details on the history of the period, to the question of "what does 1920-1921 tell us about macroeconomic policy today".
Have a glass of wine and take a breath. If you take life too seriously, you'll never get the chance to live.
DeleteFor some reason I feel like in a couple of exchanges with you recently I've come across as more uptight than I really am.
DeleteI think IB is probably a little too worried, but there's a kernel of truth in terms of misreading people, and it's gone on a lot lately, and a lot of it has swirled around Krugman. I'm just pointing out (in response to his comment) that on this issue I think I've laid out pretty clearly what I think and don't think.
It's a beer night anyway - most are. I would have to buy much cheaper wine than I do to have it every night. Beer is my regular companion. Wine is what keeps me civilized.
It's all good, Daniel. It's always difficult for certain feelings and intents to come across correctly in written comments. The above comment struck me as if you were irritated, so I figured I'd just tell you to take a breather and not let people get to you. We're all essentially trying to change the world, which is no small feat and can often be very stressful, especially if you really care as much as many of us apparently do. I know that I've often come across as a complete jerk in the past, which I have noticed and have been correcting. If you weren't getting as irritated and stressed as I thought you were, then that is certainly a good thing. But, if ever you do find yourself getting stressed by what others say, just realize that some things are more important than what some douche on the internet thinks.
DeleteCongratulations, Daniel Kuehn!
ReplyDeleteBTW Daniel I hadn't seen your posts here until after posting my response to your note. I.e. I had fallen behind on your blog, saw Krugman's thing, and made my response. So I didn't realize you personally were ambivalent about whether the Wilson budget cuts caused the downturn; I thought you believed they did.
ReplyDeleteOh yeah, I almost forgot to mention something regarding the beer. My cousin has started a small micro-brew in the DC area called 'Nameless'. I've never tasted it, so if you ever get a chance to try it it, tell me what you think of it. Thanks.
ReplyDeleteUnfortunately, it is only at the co-op level at this point, but I am sure that it will grow larger in the near future.
Delete