tag:blogger.com,1999:blog-1740670447258719504.post6634989140540336616..comments2024-03-27T03:00:27.024-04:00Comments on Facts & other stubborn things: Depression Era AusterityEvanhttp://www.blogger.com/profile/12259004160963531720noreply@blogger.comBlogger18125tag:blogger.com,1999:blog-1740670447258719504.post-381676768440602712012-04-27T11:53:56.990-04:002012-04-27T11:53:56.990-04:00Nice, reasonable post. I've been following a ...Nice, reasonable post. I've been following a bit of the anti-Krugman blogging, and I've noticed that most is focused just on data. I think it's important to ask whether the data tells the whole story of Hoover. I'm definitely NOT a historian of the era, but it's my understanding of the Hoover years that Congress generally was responsible for the spending, while Hoover remained a fan of austerity. While this wasn't true in every instance, the tendency played out in the election that followed, when Hoover was successfully painted by Roosevelt as being cold and uncaring. If there is truth to my understanding, then pundits may correctly call Hoover an "austerian," even while spending ticked up a bit.David A. Walkerhttps://www.blogger.com/profile/15734642487576071835noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-27911662739121780192012-02-23T00:58:39.937-05:002012-02-23T00:58:39.937-05:00bumpbumpGreegohttps://www.blogger.com/profile/15681628430932495733noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-24446723100001517562012-02-22T00:10:55.468-05:002012-02-22T00:10:55.468-05:00Daniel, considering Krugman's definition of &#...Daniel, considering Krugman's definition of 'austerity economics' didn't mention tax increases, how could evidence of tax increases "buttress Krugman's point about austerity"?Greegohttps://www.blogger.com/profile/15681628430932495733noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-51688791457886322182012-02-21T13:02:27.693-05:002012-02-21T13:02:27.693-05:00I am not sure this is really a "solid" e...I am not sure this is really a "solid" estimate of the output gap, but it is a starting point:<br /><br />http://www.forbes.com/2009/02/12/stimulus-depression-deficits-opinions-columnists_0213_bruce_bartlett.htmlLord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-36207277211730261562012-02-21T12:23:38.988-05:002012-02-21T12:23:38.988-05:00I'm not saying the sm crash was caused by wage...I'm not saying the sm crash was caused by wage rigidity, but that later declines in stocks and bank panics were caused by massive business losses and their inability to cut costs and liquidate. Real wages rose after wages were cut because they declined sluggish and they were less than process declines. Best in mind most loans were consumer based. And I'm talking about business stocks and bonds that make up a banks equityAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-91525178787517586542012-02-21T11:51:42.270-05:002012-02-21T11:51:42.270-05:00And anyway the stock market and equity crash began...And anyway the stock market and equity crash began <i>before</i> Hoover tried to convince certain industrialists to maintain wages.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-21066042969896843122012-02-21T11:49:31.564-05:002012-02-21T11:49:31.564-05:00Your explanation of the banking panics is nonsense...Your explanation of the banking panics is nonsense.<br /><br />Early wage rigidity, if anything, allowed debtors to continue servicing debts, which helped the financial sector. When wage cuts really did hit from 1931, was the depression reversed?<br /><br />Wage cuts drove both debtors and creditors into bankrupcy<br /><br />And the collapse in equity values was caused by distress selling, a familiar part of Fisher's debt deflationary theory.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-7877821634789035832012-02-21T11:36:04.872-05:002012-02-21T11:36:04.872-05:00Actually lord keynes, the wage rigidity was a majo...Actually lord keynes, the wage rigidity was a major cause of the banking panics. Stiff wages lead to large losses in major firms, reducing the equity values of the banks that held their securities (bonds stocks etc). With less equity, more banks moved from the illiquid to the insolvent category. People panicked. See vedder and galloway on this.Patchnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-61250455093324199112012-02-21T11:26:13.772-05:002012-02-21T11:26:13.772-05:00"In your next comment you are vague but the g...<i>"In your next comment you are vague but the general implication is that Austrians are wrong for blaming Hoover about propping up wages, too.</i><br /><br />The Austrian obsession with flexible wages is just another version of the Walrasian fable that there is a unique price vector that clears all markets, including the labour market. That requires the mythical Walrasian auctioneer who adjusts prices to clear all markets, amongst other unrealistic assumptions.<br /><br />In fact, even with <i>perfectly flexible wages and prices</i> you can still have involuntary unemployment, as Keynes showed long ago. <br /><br />Moreover, cutting wages in the context of a deep private debt crisis (as in 1929-1933) just causes the catastrophe of debt deflation, as Irving Fisher long ago pointed out.<br /><br />And cutting wages wouldn't have stopped the banking collapses in 1929-1933, a major source of the collapse in aggregate demand.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-17578539860861031902012-02-21T11:17:50.651-05:002012-02-21T11:17:50.651-05:00"The entire devil is in the details (spending...<i>"The entire devil is in the details (spending on what, why, by whom etc)."</i><br /><br />Spending in accordance with the utility preferences of private agents who receive an income from government stimulus or extra spending power through tax cuts??<br /><br />Socially and economically useful public investment?Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-15130568157464497682012-02-21T10:26:09.556-05:002012-02-21T10:26:09.556-05:00I cannot understand any economic theory that expla...I cannot understand any economic theory that explains depressions as a result of too much/too little spending. The entire devil is in the details (spending on what, why, by whom etc).<br /><br />You're making Keynesianism appear very crude in this article.Mattheus von Guttenberghttps://www.blogger.com/profile/09404889240800715511noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-34592679462093622272012-02-21T10:15:55.546-05:002012-02-21T10:15:55.546-05:00re: "People shouldn't have to go to your ...re: <i>"People shouldn't have to go to your blog and skim to see if you've talked about spending cuts under Hoover."</i><br /><br />I don't expect them too, I was just pointing them out.<br /><br />Now if I don't expect them to browse my blog to find my opinions, I think it's fair that they shouldn't invent opinions for me.<br /><br />Don't you think that's fair?Daniel Kuehnhttp://www.factsandotherstubbornthings.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-75870768923025643382012-02-21T10:14:33.134-05:002012-02-21T10:14:33.134-05:00re: "OK, so there's nothing in there abou...re: <i>"OK, so there's nothing in there about tax hikes. It's all about spending cuts"</i><br /><br />Jerry said this too, and it's just wrong Bob. The paragraph you quoted was all about spending cuts. Elsewhere in the post Steve spent <b>an entire paragraph</b> talking about tax increases, which seems to buttress the claim that the Hoover administration was a period that could be characterized as "fiscal austerity".<br /><br />Why do you and Jerry act as if I have to respond to this one paragraph out of Steve's entire post?<br /><br />re: <i>"From that one sentence, we were supposed to realize that you endorsed our stats on spending going up?"</i><br /><br />From not criticizing your claims about spending at all, were you supposed to think that I had problems with spending?<br /><br />I'm not clear on what the point is. Do I have to make a table of every point made in a blog post with two columns: "Agree" and "Disagree", and check off where I fall on each point that is made? I'm obviously not shy about coming out and saying that I disagree with something.<br /><br />re: <i>"You totally made it sound like you were siding with Krugman against Horwitz, which could only make sense if you doubted Horwitz's data on spending."</i><br /><br />I'm still confused about what I said that implies that I think Hoover cut spending. I've reread my comment several times now. I never said that. Are you suggesting that if one says that (1.) a big part of a deficit is caused by reduced revenue, and (2.) there were tax increases that that implies spending was cut? I don't see the logical chain there.<br /><br />Anyway - what was even more annoying about the whole thing is that the post got off Hoover because a handful of people demanded I defend a claim I never made.<br /><br />Which is my point in this post, to make two things very clear:<br /><br />1. Hoover raised spending.<br />2. The Hoover administration can be fairly characterized as "fiscal austerity"<br /><br />I stand firmly by both of those, just as I always have.Daniel Kuehnhttp://www.factsandotherstubbornthings.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-20878153826881098492012-02-21T09:29:52.392-05:002012-02-21T09:29:52.392-05:00Daniel, I am going to take the time to go through ...Daniel, I am going to take the time to go through and explain what happened in that thread, since you genuinely seem mystified. I really think you need to understand why things like that happen, so you don't go through life feeling victimized.<br /><br />First of all, those two guys shouldn't have been rude to you. Unfortunately, that doesn't seem to be a trait unique to Austrians, but to humans in general, at least ones with Internet access.<br /><br />In his post, Horwitz first quoted Krugman who wrote:<br /><br /><i>Specifically, in early 2010 austerity economics — <b>the insistence that governments should slash spending even in the face of high unemployment — became all the rage in European capitals. The doctrine asserted that the direct negative effects of spending cuts</b> on employment would be offset by changes in “confidence,” that savage spending cuts would lead to a surge in consumer and business spending, while nations failing to make such cuts would see capital flight and soaring interest rates. If this sounds to you like something Herbert Hoover might have said, you’re right: It does and he did.</i><br /><br />OK, so there's nothing in there about tax hikes. It's all about spending cuts, and although Krugman doesn't explicitly say it, the average NYT reader would certainly think that the Hoover years were characterized by sharp cuts in government spending, in response to the 1929 crash.<br /><br />So in response, Horwitz said that was a big pile of doodoo. Horwitz listed a bunch of facts showing Hoover increased spending. (Horwitz also listed facts showing deficits went up, that he hiked tax rates, and that he instituted a New Deal-lite.)<br /><br />Now I reproduce in full your first comment:<br /><br /><i>My understanding is that the deficits were primarily caused by reduced tax revenue... that doesn't seem like an anti-austerity deficit to me.<br /><br />Also - you go on at length about raising taxes. Doesn't this buttress Krugman's point about austerity??? I really don't understand the argument on this one. How is Krugman giving us a big pile of bullshit if you turn around and then give us a whole paragraph describing Hoover's tax increases?<br /><br />As I've said in the past, this argument often boils down to people talking past each other, because everyone has their own counter-factual when they talk about "austerity". Hoover did far less then he should have done, which is why a lot of Keynesians speak ill of him, and more than you all think he should have done, which is why you speak ill of him.<br /><br />It's the same logic behind why Scott Sumner argues Bernanke has kept monetary policy tight. Sumner is exactly right, given the context of the statement. Opponents of Bernanke on the other side are right too, given their context. For this reason, I think we need to be careful about accusations.<br /><br />But I am genuinely confused on that taxes point. That seems to be making Krugman's case.</i><br /><br />Notice Daniel, you literally <b>did not use the word "spending" and how you agreed with us</b>. Right off the bat, you questioned whether the deficit figures that Horwitz offered were actually helping with Horwitz's case. Then you say the tax data buttress Krugman's case. In your next comment you are vague but the general implication is that Austrians are wrong for blaming Hoover about propping up wages, too.<br /><br />Now yes, in retrospect I can see where you thought you were making it crystal clear that you agreed with the spending point, when you wrote:<br /><br /><i>Hoover did far less then he should have done, which is why a lot of Keynesians speak ill of him, and more than you all think he should have done, which is why you speak ill of him.</i><br /><br />From that one sentence, we were supposed to realize that you endorsed our stats on spending going up? People shouldn't have to go to your blog and skim to see if you've talked about spending cuts under Hoover. You totally made it sound like you were siding with Krugman against Horwitz, which could only make sense if you doubted Horwitz's data on spending.Bob Murphyhttps://www.blogger.com/profile/04001108408649311528noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-66585679758898512232012-02-21T09:07:05.878-05:002012-02-21T09:07:05.878-05:00You're welcome Daniel. BTW, just for the recor...You're welcome Daniel. BTW, just for the record, I recently e-mailed Dr. Brady and he did say that he would be willing to work with you on a journal article.Blue Auroranoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-36750618325834754682012-02-21T09:00:28.145-05:002012-02-21T09:00:28.145-05:00Thanks!
Ya - I saw it but I haven't gotten the...Thanks!<br />Ya - I saw it but I haven't gotten the chance to read anything. It looked interesting, though. It's doubtful I'll be able to add any extracurricular reading for a while.Daniel Kuehnhttp://www.factsandotherstubbornthings.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-5258386144870308682012-02-21T08:55:58.069-05:002012-02-21T08:55:58.069-05:00Very good post, Daniel Kuehn.
Sorry to be off-top...Very good post, Daniel Kuehn.<br /><br />Sorry to be off-topic, but did you get to see my e-mail?Blue Auroranoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-54225444526001356182012-02-21T08:46:06.524-05:002012-02-21T08:46:06.524-05:00btw - I searched in vain for a solid estimate of t...btw - I searched in vain for a solid estimate of the output gap in the depression.<br /><br />If anyone knows that, I think that would be a great addition to the graph above - to really highlight why it is that people call the early 1930s a period of fiscal austerity, and why it's NOT bullshit to call it that.Daniel Kuehnhttp://www.factsandotherstubbornthings.blogspot.comnoreply@blogger.com