23 Nov 2015

Sumner, the Gold Standard, and the Great Depression

Market Monetarism, Scott Sumner, Tyler Cowen 80 Comments

Scott Sumner’s new book on the Great Depression is coming out December 1. This is definitely something I will get and digest next year, as I’m swamped. I believe the blurbs when they say this will be a classic in the field. Among other things, Scott has (apparently) interspersed newspaper clippings and real-time financial market reactions to various events, which is not something economic historians often do.

Now to be sure, Scott has a very nuanced theory of how various factors came together to produce the Great Depression. And yet, the title of the book is The Midas Paradox. And here is Tyler Cowen’s summary of the book in his list of the best of 2015: “Boo to the gold standard during the Great Depression.”

Now let me step back and make some big-picture observations:

(1) The classical gold standard was in place from (say) 1880 – 1914, and much earlier depending on your definition. But it broke down during World War I and was replaced with something weaker, the Gold Exchange Standard, which itself broke down in 1931 (all explained at this link). Various countries started “going off gold” through the 1930s, with Japan, Germany and Great Britain doing so by 1931. FDR devalued the dollar in terms of gold in 1933. And yet “the Great Depression” typically refers to the entire decade of the 1930s.

(2) None of the financial panics that occurred during the classical gold standard turned into the Great Depression. It was only in the midst of the other interventions–particularly high-wage policies–that Sumner discusses, did we get the Great Depression.

(3) The Great Recession, which according to some metrics is the worst economic calamity second only to the Great Depression, happened when all the countries were on fiat money–so no link to gold whatsoever–yet had plenty of other government regulations on labor markets and the financial sector.

To me, this is a bit like writing a book called The Steam-Powered Curse, showing how the railroads caused the Great Depression.

23 Nov 2015


Potpourri 6 Comments

==> No other economist comes up with stranger blog ideas than Nick Rowe.

==> These people are shameless.

==> Rob Bradley pushes back against climate alarmism. (If you’re thinking, “C’mon Murphy, who are these ‘alarmists’ you keep talking about?”–see the previous link.)

==> David Beckworth wants Congress to rein in the wild Fed (sort of).

23 Nov 2015

Contra Krugman Episode 10: Terrorist Attacks Aren’t Good for the Economy

Contra Krugman 8 Comments

Oh this was a fun one, with guest Scott Horton. I didn’t work it into the episode, but let me take the time here to note that my refined analogy (about you trying to decide whether to fix your car or cut the lawn, and then someone sets your house on fire and snaps you into action) was based on a point Silas Barta made several years ago, when we were arguing about the broken window stuff.

22 Nov 2015

The Problem of Pain

Religious 20 Comments

That of course is the title of a famous CS Lewis book. Here let me make two observations:

(1) For believers, suppose that when you die, you realize that all the bad things in your life steered you into the type of person you yourself wanted to become.

(2) Given that humans were going to experience some type of pain in the world, it was then necessary for God to endure agony Himself. So not only did God Himself suffer torture and execution on a cross, but He also witnessed His only Son being tortured and executed by evil men. That’s pretty awful. So God’s plan doesn’t conveniently place the burden all on the humans.

21 Nov 2015

Drone Operator Whistleblowers

Big Brother 3 Comments

I heard this episode of “Democracy Now!” during my trip to Houston today. Some serious stuff, I encourage you to have this playing at least in the background.

20 Nov 2015

A Revealing Misunderstanding

Pacifism 26 Comments

This is actually kind of interesting. I made this wiseguy FB post:

FB Carpenters

What I meant was, it puts you in such a good mood to hear “Merry Christmas Darling” or “Walking in a Winterland,” that it would make the fighters chill out and lay down their arms. The extra joke of course was that they obviously wouldn’t celebrate American Christmas.

But the people in the comments were saying stuff like, “Nickelback” and “Yeah they’d get so depressed they’d kill themselves.”

So people clearly thought I meant that it would be a weapon.

Now, I don’t think it’s because my taste in music is off. (I like Barry Manilow too, but I understand that he is the butt of jokes.) I think the reason this joke missed is that people just assumed that if I had a plan to do something with this group, it involved killing them.

Whereas in my mind, especially with the persona I’ve cultivated with my FB jokes over the years, I thought it was obvious that I would come up with a solution that everybody would endorse. As if I were called in to negotiate a labor dispute, not stop terrorists.

I’m being serious, I think most people vastly underestimate the number of situations where there are decent non-violent outcomes. I’m not in the post going to give my plan to neutralize terrorists, I’m making a general observation.

19 Nov 2015

Krugman on Obama National Security State: “He’s Normal”

Contra Krugman, Krugman 26 Comments

For an episode of Contra Krugman I want to remind our listeners of Krugman’s assessment of the Obama presidency in Rolling Stone in late 2014. Here’s the one time I heard Krugman address Obama on foreign policy / civil liberties (he never stops talking about the war crimes of the George W. Bush years), and here’s what Krugman said:

So far, i’ve been talking about Obama’s positive achievements, which have been much bigger than his critics understand. I do, however, need to address one area that has left some early Obama supporters bitterly disappointed: his record on national security policy. Let’s face it – many of his original enthusiasts favored him so strongly over Hillary Clinton because she supported the Iraq War and he didn’t. They hoped he would hold the people who took us to war on false pretenses accountable, that he would transform American foreign policy, and that he would drastically curb the reach of the national security state.

None of that happened. Obama’s team, as far as we can tell, never even considered going after the deceptions that took us to Baghdad, perhaps because they believed that this would play very badly at a time of financial crisis. On overall foreign policy, Obama has been essentially a normal post-Vietnam president, reluctant to commit U.S. ground troops and eager to extract them from ongoing commitments, but quite willing to bomb people considered threatening to U.S. interests. And he has defended the prerogatives of the NSA and the surveillance state in general.

Could and should he have been different? The truth is that I have no special expertise here; as an ordinary concerned citizen, I worry about the precedent of allowing what amount to war crimes to go not just unpunished but uninvestigated, even while appreciating that a modern version of the 1970s Church committee hearings on CIA abuses might well have been a political disaster, and undermined the policy achievements I’ve tried to highlight. What I would say is that even if Obama is just an ordinary president on national security issues, that’s a huge improvement over what came before and what we would have had if John McCain or Mitt Romney had won. It’s hard to get excited about a policy of not going to war gratuitously, but it’s a big deal compared with the alternative. [Bold added.]

18 Nov 2015


Nick Rowe, Potpourri, Tom Woods, Tyler Cowen 18 Comments

==> Tom Woods has had a bunch of interesting episodes lately at his podcast. You know, the one that has 50% fewer hosts and is 50% as cool.

==> Second only to his posts that transformed my understanding of government debt burdens, this is my favorite work by Nick Rowe.

==> Cliff Asness is really interesting; read his interview with Tyler Cowen.

==> Josiah Neeley linked me to this analysis, which (if correct) shows that actually the men have nothing to do with it: apparently the death rate is up for non-Hispanic white women younger than 52. Note that I have no idea if this guy is right, but he seems competent and honest.

==> Von Pepe sent me this panel discussion about the Chicago School.

==> Remember that time when RBC theorists said the Great Depression was caused by shocks to total factor productivity, and the Keynesians laughed at their “Great Vacation” explanation? Awwwwkward.

==> Gene Callahan is developing into an absolutely perfect crotchety old man.