Don Boudreaux quotes Buchanan thusly:
"But the 1930’s were perilous times, and the Great Depression left deep scars. The revolution in economic thought stirred men’s souls; the banner of full employment was to be advanced at all costs and against whatever odds. This became the vital center of attention. Little time was available for careful examination of the intellectual stumbling blocks which the old-fashioned ideas on public debt seemed to represent. Out these ideas went, and the “new” ideas were left only to be picked up and carried forward, not by scholars of public debt theory, but by fiscal policy advocates."
I have three questions:
1. Is this a historically accurate or inaccurate description of way people thought at the time?
2. Is this a a historically accurate or inaccurate description of the way people approached scientific analysis of the economy at the time (not whether the analysis is now considered completely right, but whether they were uncareful, whether they were just being advocates, etc.)?
3. If the answer to one or both of the preceding questions are "no", how should feel about this quote and about Buchanan's argument about the impact of Keynesianism on the late 20th century?
Check out the first edition of Samuelson's textbook, from 1948. The fear is certainly there (one of the questions in the first couple chapters is 'what will you do during the next depression?') and the strong emphasis on fiscal management is definitely there - there's a line, I think early on, to the effect of: 'only when we have mastered the macroeconomic imbalances, then can classical economics come to its full flowering.'
ReplyDeleteSo I think the answer to question 1 is yes, unless I am completely misunderstanding Buchanan. Most scholars of that generation were simeoltaneously advocates and scholars. Question 2 is less obvious and depends on how you interpret their research. On one hand, the formalization of economics was taking place at this time, so in that sense they were being more careful. If they were being uncareful in any way, it would have to be in the assumptions people accepted.
Simultaneously might be the wrong word (plus I misspelled it). "both scholars and advocates" would probably be more accurate.
ReplyDeleteRyan -
ReplyDeleteFirst - it's well established that Samuelson was not representative of the early post-war fears among Keynesians.
Second - I'm not sure how your description of Samuelson matches that anyway. Of course it's reasonable to worry about another depression. Of course solving that depression is important. I think that right now. I don't see how that implies what Buchanan is saying here about "at all costs" and certainly not "little time was available for careful examination". It's precisely because of it's so important that careful examination is necessary. And the new ideas were not pushed forward be scholars?
I don't see how Samuelson's concern supports any of this Ryan. Could you clarify your argument a little?
Anyway, it's a very opportunistic paragraph in my opinion, but I wanted to give people the chance to comment.
ReplyDeleteI wish Don wouldn't quote Buchanan on Keynes so damn much. I have a tremendous amount of respect for Buchanan, but almost everything he has on Keynes reads to me like words from a completely different pen.
It's like Hayek's statements about scientism and economics. It's so poorly argued I would have trouble accepting the same person wrote it if I didn't know otherwise.
There is basically no basis for the claim that deficits did not matter to the post-war generation of economists. There was a push for full employment, but that was always tempered by a clear prescription for counter-cyclical government policy so that budgets were balanced on average.
ReplyDeleteThe "New Frontier" economists of Kennedy/Johnson get a lot of flack from not only these guys but also Brad DeLong for creating the inflation of the 70s (which, btw, was the actual problem that was created, there were no deficit problems until the Buchanan types took over). However, it was Johnson's ignoring the advice of economists (and lying to them/hiding the cost of the Vietnam war) that caused the inflation of the 70s.
I mean, what the hell is a "scholar of public debt theory"? It is really weird to imply that if one is not overly preoccupied to the point of distraction and myopia about debt that they do not take deficits seriously.
As for whether these economists were advocates. That's a completely meaningless rhetorical attack.
Keynesians were always held at arms length in public policy circles in the US. Even during the 60s the presidents were more or less uneasy with the policies that their economics staff were advocating. And even that ignores what happened to legislation that came out of the White House when it was subject to the congress.
As far as I'm concerned Buchanan is just repeating the same thing we all are supposed to take for granted by the end of our first year of grad school which is a pure mythology about why the Lucas/Friedman/Prescott revolution took hold. Keynesian economists are just not very serious people.