23 Sep 2009

Brad DeLong Continues to Paint Hoover as Mr. Laissez-Faire

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As Free Advice readers know, I have taken the Krugman/DeLong side in their debate with the Chicago School. In a nutshell, people like Cochrane and Fama are saying that in principle the government can’t boost nominal spending in the present, as if it’s a matter of accounting. That’s just wrong, especially if you allow for the Fed. (E.g., saying “deficits just rearrange resources” could just as well “prove” that printing money couldn’t possibly provide an artificial boom. The only way to make the argument work is to incorporate “idleness” as part of the legitimate market use of resources–which I do here–but that’s not what Cochrane et al. seem to have in mind.)

But here I think Brad DeLong goes absurdly awry in his counter-counterattack (HT2PK). DeLong quotes Prescott who said:

“I don’t know why Obama said all economists agree on [the need for a stimulus bill]. They don’t. If you go down to the third-tier schools, yes, but they’re not the people advancing the science…” and “the period of the ’20s was one of healthy growth, until Hoover’s anti-market, anti-globalization, anti-immigration, pro- cartelization policies were instituted, brought this expansion to an end, and created a great depression…”

Then DeLong supposedly corrects this historical caricature by saying: “Herbert Hoover was on the right wing of the American political spectrum and tried as best he could to follow pro-market, pro-globalization, pro-competition economic policies…”

In case you’re wondering, not a word in there about how this pro-globalization guy signed off on the Smoot-Hawley tariff, which has a reputation as being anti-globalization. Less famous, Hoover also was proud of the massive turnaround in immigration during the early 1930s. (I don’t remember if he enacted policies to promote this trend, or if it was purely due to the relative deterioration of US job prospects.)

If DeLong wants to challenge Prescott’s statement, I think the onus is on him (DeLong). Oh, and jacking up the top income tax rate from 25% to 63% in one year is also not something that shouts “pro-market” to me. (Look at the rates in 1931 and 1932.) But again, you won’t find any explanation from DeLong on why this is evidence of a hardcore right-winger.

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