Economist: Hoover’s pro-labor policies created the Depression

posted at 5:55 pm on August 31, 2009 by Ed Morrissey

In times of economic crisis, the temptation for public officials to do something is both overwhelming and tremendously dangerous.  UCLA’s Dr. Lee Ohanian makes that point plain in his latest research on the Great Depression and its primary causes, in which Herbert Hoover’s reputation as a free-market politician gets serious revision.  Hoover’s deal with manufacturing giants to keep wages high turned what should have been a deep but temporary recession into an economic disaster:

Pro-labor policies pushed by President Herbert Hoover after the stock market crash of 1929 accounted for close to two-thirds of the drop in the nation’s gross domestic product over the two years that followed, causing what might otherwise have been a bad recession to slip into the Great Depression, a UCLA economist concludes in a new study.

“These findings suggest that the recession was three times worse — at a minimum — than it would otherwise have been, because of Hoover,” said Lee E. Ohanian, a UCLA professor of economics. …

After the crash, Hoover met with major leaders of industry and cut a deal with them to either maintain or raise wages and institute job-sharing to keep workers employed, at least to some degree, Ohanian found. In response, General Motors, Ford, U.S. Steel, Dupont, International Harvester and many other large firms fell in line, even publicly underscoring their compliance with Hoover’s program.

Designed to placate labor and safeguard workers’ buying power, the step had an unintended effect: As deflation eventually did set in, the inflation-adjusted value of these wages rose over time, effectively giving workers a raise precisely at the time when companies were least in a position to afford such increases and precisely when productivity was beginning to fall.

“The wage freeze effectively raised the cost of labor and, by extension, production,” Ohanian said. “If you artificially raise the price of production, your costs go way up and you pass them on to the customers, and they buy that much less.”

As with other big government interventions, Hoover made the situation worse by attempting to control one part of the economic picture.  When he froze wages, it amounted to across-the-board increases in buying power as deflation set in — and made their companies unable to pass along the costs of production to consumers.  After two years, employment had dropped 35% and GDP by 27% as the American economy collapsed.  Ohanian argues that two-thirds of that GDP decline can be directly attributable to this deal.

In comparison, Ohanian notes that the agricultural sector — exempt from the Hoover deal — performed much better.  Agricultural wages dropped 30% in that period, but hours worked remained fairly constant through 1931.  In fact, the ag sector continued to do (comparably) well until the 1935 Dust Bowl, which ravaged American farming and touched off the nation’s first large-scale homelessness.

Hoover wanted to avoid the political fallout of high unemployment and deflation at the same time.  He hoped that his deal would arrest the fall of prices as well as wages by artificially keeping the latter frozen.  That only works if people have capital to continue to buy; otherwise, it creates a kind of Ponzi scheme in which the manufacturers get left holding the bad, and in which workers get their hours cut progressively until they are in de facto unemployment.

We have seen the results of other large-scale government interventions the last few years, too.  In the case of housing, however, the government didn’t respond to a crisis, but to prosperity.  The Clinton administration — and more than a few Republicans — wanted to expand home ownership and distorted the lending markets to create a demand bubble, and essentially another Ponzi scheme in which buyers were encouraged to overreach and then refinance on equity gains.  Congress fueled it through mandates to Fannie Mae and Freddie Mac to buy and securitize marginal loans that eventually collapsed and poisoned the entire financial sector.

Government has a legitimate role in regulating markets to prevent fraud and abuse.  It does not have a legitimate role in manipulating markets for social engineering, no matter how well-intentioned that social engineering might be.  Be sure to read the entire report.


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LEAVE AMERICA ALONE!

faraway on August 31, 2009 at 5:56 PM

It’s all there in Amity Shlaes’s great book “The Forgotten Man”.

TexasJew on August 31, 2009 at 5:57 PM

It’s all there in Amity Shlaes’s great book “The Forgotten Man”.

TexasJew on August 31, 2009 at 5:57 PM

Yup. It’s a must read.

Patrick Ishmael on August 31, 2009 at 5:59 PM

“It does not have a legitimate role in manipulating markets for social engineering, no matter how well-intentioned that social engineering might be.”

Obama and the Democrats believe the exact opposite…

Seven Percent Solution on August 31, 2009 at 6:02 PM

I guess Obama is trying real hard to do his Hoover impression…..

izoneguy on August 31, 2009 at 6:02 PM

Obamaville’s to come?

PappaMac on August 31, 2009 at 6:06 PM

Olympia snowe
this is off topic but it has to be posted here. She is going to cave and side with the libs on healthcare. Burn her phones at her offices. Pick a zip code or a town in Maine, call her office saying you represent a group of seniors and let her know she’s out if she votes with the libs. Better yet, take a page out of alinskys rules for radicals and say your moderate democrats against the bill. Stop her now before she caves! Call now!!

texaninfidel on August 31, 2009 at 6:07 PM

I don’t think Hoover was really all that pro labor. People at the time thought he was pro something else entirely.

He was an engineer and when he ran a mining operation in Russia. The communists came in and took it over. By then the foreigners had left. The communists gave the business to the workers who could not read the blueprint and in a month it was broke. Tens of thousands of people were left hungry.

Terrye on August 31, 2009 at 6:07 PM

Nixon did something very similar with the price controls in the 70s…almost wrecked the economy then too. His economic policies during that period destroyed any legacy he had as a true conservative.

AUINSC on August 31, 2009 at 6:07 PM

In the book I recently read, The Forgotten Man by Amity Shlaes, Hoover was given mixed reviews. But neither he or FDR were given credit for really doing that much to help matters.

Terrye on August 31, 2009 at 6:09 PM

I thought Henry Ford fought Hoover on wage freezes.

jhffmn on August 31, 2009 at 6:10 PM

Olympia snowe
this is off topic but it has to be posted here. She is going to cave and side with the libs on healthcare….

texaninfidel on August 31, 2009 at 6:07 PM

Do you have a link?

right2bright on August 31, 2009 at 6:10 PM

Yup. It’s a must read.

Patrick Ishmael on August 31, 2009 at 5:59 PM

Agreed.

jhffmn on August 31, 2009 at 6:12 PM

Don’t just do something –STAND THERE!

Read Amity Schlaes, “The Forgotten Man”

excellent book on the origins of the Great Depression.

ted c on August 31, 2009 at 6:12 PM

Geeze, it only took 80 years to figure this out?

Del Dolemonte on August 31, 2009 at 6:17 PM

No, no, nope and no. The reason why the country suffered in the Great Depression is because FDR didn’t spend enough. Just ask Barry.

John the Libertarian on August 31, 2009 at 6:20 PM

Nixon did something very similar with the price controls in the 70s…almost wrecked the economy then too. His economic policies during that period destroyed any legacy he had as a true conservative.

AUINSC on August 31, 2009 at 6:07 PM
I think it was Gerald Ford with his WIN campaign but good point.

fourdeucer on August 31, 2009 at 6:20 PM

You mean to tell me that people that have never made a product or provided a service would screw the business environment up by doing good?

jukin on August 31, 2009 at 6:20 PM

“Wage and price controls don’t work. They didn’t work during the Nixon administration, they didn’t work during the Hoover administration, and they didn’t work during the Roman Empire. And I’m the only candidate old enough to remember back that far.” –Ronald Reagan

backwoods conservative on August 31, 2009 at 6:22 PM

Of course, modern day libs try to paint Hoover as being a right wing free market conservative, which he was not. Republicans of that era were NOT conservatives, actually the democrats tended to be. It was after World War II that the “progressive” movement shifted from the Republican to Democrat party.

wildcat84 on August 31, 2009 at 6:23 PM

Whenever a scientific study shows up that goes against what people at HotAir believe, they say that it’s nonsense, the scientists have an agenda, the methods are suspect, etc. Whenever a study shows up that validates what they believe, they cite it as proof that they’re right.

Shouldn’t you guys have a healthier sense of uncertainty about the studies like this that come out, especially when there is debate within the scientific community? What is completely omitted from this post, as well as every other time the UCLA studies have been talked about at HotAir, is that other economists completely disagree. Here is an article by Ohanian himself that discusses some of these disagreements: http://www.forbes.com/2009/07/14/great-depression-economists-work-share-nira-productivity-opinions-contributors-lee-e-ohanian.html.

Why does everyone here think that they know so much about economics that they can be certain that some experts are correct and other experts are incorrect? Shouldn’t you be at least a little uncertain?

tneloms on August 31, 2009 at 6:25 PM

So then,cut to the chase,Obama’s union stance seems similar
to Herberts and in turn,Team Hopey will be sucking the life
out of the American economy via the Hoover(vaccum cleaner)
method,ahem!!(Snark).

canopfor on August 31, 2009 at 6:27 PM

Let’s face it, a Hoover always sucks.

Jeff from WI on August 31, 2009 at 6:29 PM

Let’s face it, a Hoover always sucks.

Jeff from WI on August 31, 2009 at 6:29 PM

Eureka!!

ICBM on August 31, 2009 at 6:31 PM

tneloms on August 31, 2009 at 6:25 PM

Yeah, but Krugman and his ilk aren’t really economists so you can write off all of them entirely.

jhffmn on August 31, 2009 at 6:32 PM

tneloms on August 31, 2009 at 6:25 PM

Listen, I have no problem with seeing things from many different perspectives, but I gotta tell you, if Hoover didn’t “cause the Depression” (which I’m pretty skeptical about anyway), his policies and FDR’s policies certainly made it worse and prolonged it.
I really think the Depression was a perfect storm of all the worse things of economies, politics and world events happening at pretty much the same time.

It’s hardly fair to categorize “everyone at Hot Air” agreeing with this study when there are few people commenting on it.

The cautionary tale in this whole thing is the way to relieve a depression is to NOT kowtow to unions and not to spend, spend, spend like it’s going out of style. We’re headed down a dangerous road and it appears we’ll be making the same mistakes that prolonged the Great Depression, only quicker and with much, much more money involved.

mjk on August 31, 2009 at 6:32 PM

AUINSC on August 31, 2009 at 6:07 PM

Nixon was a National Defense Conservative but a progressive in all other ways.

chemman on August 31, 2009 at 6:32 PM

Let’s face it, a Hoover always sucks.

Jeff from WI on August 31, 2009 at 6:29 PM

Eureka!!

ICBM on August 31, 2009 at 6:31 PM

You can say that again Kirby

Jeff from WI on August 31, 2009 at 6:34 PM

Let’s face it, a Hoover always sucks.

Jeff from WI on August 31, 2009 at 6:29 PM

Eureka!!

ICBM on August 31, 2009 at 6:31 PM
You can say that again Kirby

Jeff from WI on August 31, 2009 at 6:34 PM

OK, I’m gonna play Dirt Devil advocate here….

Jerome Horwitz on August 31, 2009 at 6:39 PM

Jerome Horwitz on August 31, 2009 at 6:39 PM

Then you would all miss out on the rainbow.

chemman on August 31, 2009 at 6:41 PM

In response, General Motors, Ford, U.S. Steel, Dupont, International Harvester and many other large firms fell in line, even publicly underscoring their compliance with Hoover’s program.

Still haven’t learned their lesson.

BacaDog on August 31, 2009 at 6:43 PM

OK, I’m gonna play Dirt Devil advocate here….

Jerome Horwitz on August 31, 2009 at 6:39 PM

Electro-Lux it

Jeff from WI on August 31, 2009 at 6:43 PM

Listen, I have no problem with seeing things from many different perspectives, but I gotta tell you, if Hoover didn’t “cause the Depression” (which I’m pretty skeptical about anyway), his policies and FDR’s policies certainly made it worse and prolonged it.

How do you know they made it worse and prolonged it? Many economists believe they helped, though I don’t know whether the majority of economists believe one way or the other. That’s all I’m asking; why do you believe one economist and not another? I personally see both sides and am uncertain about whether they helped or hurt, and possibly the answer is some mixture.

It’s hardly fair to categorize “everyone at Hot Air” agreeing with this study when there are few people commenting on it.

I meant everyone who comments on it. If you want a longer list, go to the previous times that the UCLA studies have been posted in the headlines, and you will see large amounts of commenters who assert that the conclusions of the analyses are true. “Everyone” is perhaps too strong, but only barely so, because there are very few who express even a healthy skepticism about the conclusions, and they are almost always called trolls.

The cautionary tale in this whole thing is the way to relieve a depression is to NOT kowtow to unions and not to spend, spend, spend like it’s going out of style. We’re headed down a dangerous road and it appears we’ll be making the same mistakes that prolonged the Great Depression, only quicker and with much, much more money involved.

mjk on August 31, 2009 at 6:32 PM

I understand that you think that, but my question is why you believe it and not, for example, the economists who argue the exact opposite?

tneloms on August 31, 2009 at 6:44 PM

tneloms on August 31, 2009 at 6:44 PM

“W’s” grandfather, Georgie “Porgie” Bush caused the great Depression when he tried to corner the pickle futures market.

Jeff from WI on August 31, 2009 at 6:49 PM

The Clinton administration — and more than a few Republicans — wanted to expand home ownership and distorted the lending markets to create a demand bubble, and essentially another Ponzi scheme in which buyers were encouraged to overreach and then refinance on equity gains.

I’m no economist, but wouldn’t this really a supply bubble? The Congress created legislation which mandated more minority lending. The boards of Fannie and Freddie offered volume bonueses to the upper management of those quasi-governmental agencies and pushed for high LTV Alt A lending programs.

Both actions tended to increase the supply of easy mortgage money to underqualified buyers.

DrW on August 31, 2009 at 6:49 PM

GM is moving to China! SHHHH!!!

sonnyspats1 on August 31, 2009 at 6:50 PM

fixed China link

sonnyspats1 on August 31, 2009 at 6:51 PM

Hoover’s approach is unlikely to be considered today as a means of responding to economic crisis, but it does illustrate the perils of ill-conceived government policies in times of economic upheaval and confusion,

Really? Sounds familiar to me.

What would Ron Gettlefinger do?

BacaDog on August 31, 2009 at 6:52 PM

I guess Obama is trying real hard to do his Hoover impression…..

izoneguy on August 31, 2009 at 6:02 PM

He sucks like a Hoover Deluxe. Wasn’t Hoover a cross dresser?

Geochelone on August 31, 2009 at 6:54 PM

Let’s face it, a Hoover always sucks.

Jeff from WI on August 31, 2009 at 6:29 PM
Eureka!!

ICBM on August 31, 2009 at 6:31 PM

ICBM:Hehe,good one,Eureka!!!:)

canopfor on August 31, 2009 at 6:56 PM

Economist: Hoover’s pro-labor policies created the Depression

Ohhhh–I read the headline & thought, “The leftist Economist magazine said what?” heh

jgapinoy on August 31, 2009 at 6:59 PM

Ray Stevens weighs in:
http://susie1114.com/10percentisgoodenough.html

jgapinoy on August 31, 2009 at 7:01 PM

I guess Obama is trying real hard to do his Hoover impression…..

izoneguy on August 31, 2009 at 6:02 PM
He sucks like a Hoover Deluxe. Wasn’t Hoover a cross dresser?

Geochelone on August 31, 2009 at 6:54 PM

Geochelone: You might have a point on the cross-dressing,
and since Obama likes to dress-up in Mom Jeans,
better send in Barny Franks for this mission,
and see how multifaceted Hopeys Hoover is,ahem,
tee-hee.:)

canopfor on August 31, 2009 at 7:05 PM

I understand that you think that, but my question is why you believe it and not, for example, the economists who argue the exact opposite?

tneloms on August 31, 2009 at 6:44 PM

Whats your point?
Unless I’m not understanding you correctly, you seem to have no point of view at all, or doubt all conclusions because someone else has a different perspective.
Whats the value in that? I’m guessing that people develop a point of view based on looking at the evidence presented by both sides..coupled with their real life personal experience and the observations of the outcomes of other peoples choices in similar situations, and decide that one position, in general, is more likely to be the most accurate read on the matter.

What is your favored conclusion on the topic, and why do you have that view when there is evidence of the other?

Itchee Dryback on August 31, 2009 at 7:14 PM

I bet nobody is speaking to Ohanian today in the UCLA faculty lounge.

If think job sharing would be okay on its own, though, without the wage/price control. It’s just a layoff in disguise, which will correct itself eventually.

PattyJ on August 31, 2009 at 7:24 PM

Unless I’m not understanding you correctly, you seem to have no point of view at all, or doubt all conclusions because someone else has a different perspective.

I said my point of view:

I personally see both sides and am uncertain about whether they helped or hurt, and possibly the answer is some mixture.

I think that’s a healthy point of view. I don’t doubt any conclusion just because someone out there disagrees, but I do doubt any conclusion when there is a critical mass of experts that disagrees, which is the case here.

I’m guessing that people develop a point of view based on looking at the evidence presented by both sides..coupled with their real life personal experience and the observations of the outcomes of other peoples choices in similar situations, and decide that one position, in general, is more likely to be the most accurate read on the matter.

Itchee Dryback on August 31, 2009 at 7:14 PM

I absolutely agree with this, but I don’t think that most people (myself included) have the ability to read the arguments of two well-respected economists who disagree on an issue, and decide that one is correct and another is incorrect with great certainty. I can certainly tend to favor one over the other, but my point was that commenters here tend to be pretty much 100% certain of their conclusions, and see studies like this one as proof that they are correct.

(I also doubt that most commenters here have actually read the opposing research and come to their conclusions in the manner that you say.)

tneloms on August 31, 2009 at 7:25 PM

I understand that you think that, but my question is why you believe it and not, for example, the economists who argue the exact opposite?

tneloms on August 31, 2009 at 6:44 PM

It’s a matter of judgment. If no decision is required, at the moment, you wait for more evidence. If a decision is required you make the call. If you are right, you are the hero, if you are wrong, you’re the goat. It’s why those guys make the big bucks.

Skandia Recluse on August 31, 2009 at 7:32 PM

Or you can wait for a ‘consensus’ and sign off on the group decision. Or you can try to ‘steer’ the committee to the consensus you want. It’s the difference between an academic, an adviser, and the guy who owns the responsibility for the outcome. .

Then there’s the guy who wants to be the smartest guy in the room.

What’s your problem with holding a conclusion that conflicts with someone’s opinion?

Skandia Recluse on August 31, 2009 at 7:40 PM

I’m not buying this truck load.
-
A novice Federal Reserve expanded the money supply all through the roaring 1920′s. Then drastically changed course, causing the stock market crash and a nasty recession.
-
Then a genius U.S. Congress passed protectionist legislation resulting in a world wide depression.
-
FDR (liberal socialist) then made it drag on for several more years, contributing substantially the conditions for a world war.
-
A prosperous Germany would not have been sucked in by Hitler.
-
Don’t blame Hoover, he was just a run of the mill dufus.
-
“No good deed goes unpunished”.
-

esblowfeld on August 31, 2009 at 7:41 PM

This sounds like a similar analysis described in The Politically Incorrect Guide to the Great Depression. That book is highly recommended as a take on how Hoover and then Roosevelt meddled in the economy and kept making everything worse.

One point the book makes: anyone hear about the “great recession” of 1921? Apparently there was a recession that was similar to what the country was going through after 1929. In 1921, the government stayed out of the market and the recession worked itself out in 1.5-2 years. Which brings us back to the main point: if Hoover and Roosevelt had stayed out of the economy, there would never have been a Great Depression.

Mallard T. Drake on August 31, 2009 at 7:41 PM

Skandia Recluse on August 31, 2009 at 7:32 PM

I’m talking about the commenters here. And even someone who is choosing one way or another at a given moment can express uncertainty about that decision, and in almost every case should.

The commenters (and posters) here that I’m talking about seem very sure that the conclusions of this study are correct. They don’t seem to consider other studies and economists that have concluded the opposite. Economics is one of those areas where predictions are almost impossible to make, so it seems like a bad area to be so sure about anything. Even Ohanian (in the article I linked above) is able to reasonably discuss the viewpoints of those that disagree with him, and discusses the difficulties in discerning which interpretation is correct. The commenters here do no such thing.

tneloms on August 31, 2009 at 7:44 PM

The commenters (and posters) here that I’m talking about seem very sure that the conclusions of this study are correct.

tneloms on August 31, 2009 at 7:44 PM

So, pray tell, on which political blogs would we find such enlightened commenters? Give us some examples to emulate.

AUINSC on August 31, 2009 at 7:47 PM

Milton Freidman makes the case that inflation is the result of monetary policy by the federal government. If that is true, then you have to also accept that deflation is also the result of monetary policy.

The attempts by the federal government to fix/manage the economic crisis didn’t seem to help. The argument starts among the academics when you try to analyze one specific policy in a complex, dynamic system. The evidence (to me) seems to suggest that government can not manage the economy beyond a stable money supply if even that.

The most recent economic crisis seems to me one more of psychology and loss of confidence made worse by the panicked intervention of the federal government.

…and I’m nothing more than an anonymous nobody with too much time on my hands. ….

Skandia Recluse on August 31, 2009 at 7:55 PM

but I don’t think that most people (myself included) have the ability to read the arguments of two well-respected economists who disagree on an issue, and decide that one is correct and another is incorrect with great certainty.

Why not?

but my point was that commenters here tend to be pretty much 100% certain of their conclusions,

As opposed to commenters in other forums?

Can you give some examples of how you arrived at that conclusion in the presence of other points of view with their associated conclusions? Why do you believe your conclusion to be accurate?

Itchee Dryback on August 31, 2009 at 7:59 PM

So, pray tell, on which political blogs would we find such enlightened commenters? Give us some examples to emulate.

AUINSC on August 31, 2009 at 7:47 PM

If your point is that most internet blogs are full of commenters who steadfastly believe in only one viewpoint, make extreme claims constantly, use hyperbolic language, and call anyone who disagrees with them a troll, I agree with you. (See http://hotair.com/archives/2009/04/11/what-kind-of-commenter-are-you/.) Are you making the “but the rest of the internet is stupid also” defense?

I don’t know of any political blogs where the commenters are reasonable, sadly, but volokh.com is a good example of a law blog with good commenters, and a lot of the content is political.

tneloms on August 31, 2009 at 7:59 PM

tneloms 7:44Pm
Oh, what rarified (hot) air you must breathe.

With all the blogsites out there, why oh why, did you lower yourself to register here? People are going to talk. You’re certainly hung up on the lowly commenters and posters, and since none of us ‘read’ what are we to do? Whew!

24K lady on August 31, 2009 at 8:00 PM

but I do doubt any conclusion when there is a critical mass of experts that disagrees,

How do you determine that a “critical mass” has been achieved and that the mass is composed of relevant “experts”? How do you do this?

Itchee Dryback on August 31, 2009 at 8:06 PM

I don’t know of any political blogs where the commenters are reasonable, sadly,

tneloms on August 31, 2009 at 7:59 PM

Do you believe that is a reasonable conclusion?

What is it based on? Just curious.

Itchee Dryback on August 31, 2009 at 8:11 PM

Are you making the “but the rest of the internet is stupid also” defense?

I don’t know of any political blogs where the commenters are reasonable, sadly, but volokh.com is a good example of a law blog with good commenters, and a lot of the content is political.

tneloms on August 31, 2009 at 7:59 PM

Actually, I’m not making any defense at all…I don’t have anything I need to defend.

But, as you just noted, political blogs don’t usually get a lot of “yeah, I could go either way” type of comments. In earlier comments, you were singling out HA has some sort of special case.

AUINSC on August 31, 2009 at 8:13 PM

Why not?

Because economics is very complex, and even the experts are rarely able to make strong predictions with any reasonable accuracy. So why would more casual observers be able to? That doesn’t mean we should give up altogether, but it does mean that whatever conclusion we do arrive at, we should probably admit that there’s a large chance that it’s wrong.

As opposed to commenters in other forums?

See my response to AUINSC. I don’t see why the fact that most internet commenters engage in very low-level forms of “discussion” should impact what you think and say.

Can you give some examples of how you arrived at that conclusion in the presence of other points of view with their associated conclusions? Why do you believe your conclusion to be accurate?

Itchee Dryback on August 31, 2009 at 7:59 PM

In most cases where I’m not an expert, I tend to go with the consensus of the experts. For example, this is true with predictions in physics; most, though not all, scientists think that the CERN collider should be able to confirm the presence of the Higgs boson, and so I’d say they’re probably right, but possibly wrong.

With regards to economics, I am most certain about conclusions that most economists agree on, such as that free trade is a good thing for the US on almost every single dimension. There are some who disagree, and so I think it’s possible that I’m wrong. With regards to whether the minimum wage helps or hurts the poor, I tend to believe that it hurts the poor because I think that most economists tend toward that conclusion, but I’m much less certain because the issue is less settled among the experts.

There’s also the issue of who you consider an expert, and how much you trust each one, and it’s hard to answer that. But only trusting the experts on one side, and dismissing all of the experts on the other side as hacks, politically motivated, biased, etc., which is what I often see on HotAir, seems naive and wrong.

tneloms on August 31, 2009 at 8:17 PM

Blog sites are a little like second hand smoke. You either like it or you don’t. If you don’t, don’t complain to the management, when it’s clearly posted that smoking is allowed, when someone lights up.

24K lady on August 31, 2009 at 8:19 PM

tneloms on August 31, 2009 at 8:17 PM

You sound like a very timid Obama supporter who’s afraid he’s going to get beat up. You also sound like you are making an ‘I’m above it all’ genius defense who’s about to pull out the ‘appeal to authority’ arguments…have fun.

AUINSC on August 31, 2009 at 8:25 PM

Boring…the vaccuum puns were a refreshing change of pace. Thank goodness conservatives are not only bright but funny too!

indypat on August 31, 2009 at 8:26 PM

24K lady on August 31, 2009 at 8:00 PM

AUINSC on August 31, 2009 at 8:13 PM

I don’t think HotAir is different than most political blogs in this respect, and I’ve said many times elsewhere that the same is true of HuffingtonPost, DailyKos, etc. I was only talking about HotAir above because, well, this is HotAir.

The reason I read and comment on this blog is that I find many of the posts interesting, and I also try to engage in discussion with people that I disagree with. I think it’s a shame that the post and the commenters did not even mention other studies or points of view, or admit that they may be true, and that’s why I posted my comment.

tneloms on August 31, 2009 at 8:27 PM

Even Ohanian (in the article I linked above) is able to reasonably discuss the viewpoints of those that disagree with him, and discusses the difficulties in discerning which interpretation is correct. The commenters here do no such thing.

tneloms on August 31, 2009 at 7:44 PM

Do you have a link to some relevant work we should consider, if such work even exists?

Also, the article you linked above does not support your argument. Ohanian brought up oposing views to point out their fallacy.

jhffmn on August 31, 2009 at 8:31 PM

You sound like a very timid Obama supporter who’s afraid he’s going to get beat up. You also sound like you are making an ‘I’m above it all’ genius defense who’s about to pull out the ‘appeal to authority’ arguments…have fun.

AUINSC on August 31, 2009 at 8:25 PM

The fact that I don’t have extreme viewpoints and won’t consider alternatives makes me timid? I’ve been “beat up” many times before here, and I have no problem with it. I’m not saying I’m above it all in any way, just that people should be more willing to doubt their conclusions when they discuss a subject. And I don’t think we should just appeal to authority, and would much rather discuss the content of the issues. I’m only mentioning what experts think as evidence that you shouldn’t be too certain, not that they are right.

tneloms on August 31, 2009 at 8:32 PM

Blog sites are a little like second hand smoke. You either like it or you don’t. If you don’t, don’t complain to the management, when it’s clearly posted that smoking is allowed, when someone lights up.

24K lady on August 31, 2009 at 8:19 PM

I like this blog, and I also like talking to other commenters about what they think.

tneloms on August 31, 2009 at 8:34 PM

The fact that I don’t have extreme viewpoints and won’t consider alternatives makes me timid?

tneloms on August 31, 2009 at 8:32 PM

What makes you so certain your viewpoints aren’t extreme?

Anyway, you haven’t said anything about the post itself…if you think Ed needs to include differing points of view, link them in a comment and say so. I don’t understand what all of the angst is about.

AUINSC on August 31, 2009 at 8:39 PM

tneloms on August 31, 2009 at 8:32 PM

There is no need to be consumed by FUD when you are correct.
Have you never been right before? Why do you need experts to tell you what to think?

Skandia Recluse on August 31, 2009 at 8:42 PM

Do you have a link to some relevant work we should consider, if such work even exists?

Sure, Christina Romer’s publications are one small example. (http://www.nber.org/papers/W3829.pdf, http://www.brookings.edu/~/media/Files/events/2009/0309_lessons/0309_lessons_romer.pdf, and others.)

Also, the article you linked above does not support your argument. Ohanian brought up oposing views to point out their fallacy.

jhffmn on August 31, 2009 at 8:31 PM

That’s exactly what I said. He was able to discuss opposing views, explaining why reasonable people might hold them, not dismissing them as lunatic ravings, and using language that indicates that these are just likely conclusions rather than 100% certain conclusions.

tneloms on August 31, 2009 at 8:44 PM

Bernake & Geithner: their mission is clear: to convince the world of two things at the same time…both impossible and mutually exclusive! The Chinese must believe that the feds won’t undermine the dollar…and the rest of the world must believe that they will! Inflation is necessary for recovery and growth in the United States…or so everyone believes.

It was French economist Jacques Rueff who revealed the scam more than half a century ago. The whole idea of Keynesian stimulus, he explained, was to cause inflation…which would reduce the real price of labor. In a modern democracy, politics prevents wages from falling. But in a correction, if wages don’t fall people don’t get jobs. Keynes’ didn’t mention it, but the only reason his stimulus works is because it pulls the wool over the eyes of the working classes – reducing their wages by inflation so employers can afford to hire them again. Ergo, no inflation…no recovery in the job market. No recovery in the job market…no recovery in the economy.

But inflation will cost the Chinese plenty. And they’ve let it be known they won’t sit still for it

sbark on August 31, 2009 at 8:45 PM

Anyway, you haven’t said anything about the post itself…if you think Ed needs to include differing points of view, link them in a comment and say so.

AUINSC on August 31, 2009 at 8:39 PM

I did that in my first post, and then again just now.

There is no need to be consumed by FUD when you are correct.
Have you never been right before? Why do you need experts to tell you what to think?

Skandia Recluse on August 31, 2009 at 8:42 PM

This article cites an expert, which is a good thing to do when you’re trying to prove a point. But if you’re going to do that, you should also cite opposing expert viewpoints if they exist.

And in the comment you cited, I explicitly said that I’m only talking about experts here to point out that smart and reasonable people disagree (not in order for them to tell me that I’m right), and therefore you shouldn’t be too certain in your conclusions. I don’t see what’s wrong with what I’m saying. If one side of the debate were constantly making accurate economic predictions, then it would be a different story.

tneloms on August 31, 2009 at 8:50 PM

That’s exactly what I said. He was able to discuss opposing views, explaining why reasonable people might hold them, not dismissing them as lunatic ravings, and using language that indicates that these are just likely conclusions rather than 100% certain conclusions.

tneloms on August 31, 2009 at 8:44 PM

In my defense, Paul Krugman is a raving lunatic.

jhffmn on August 31, 2009 at 9:01 PM

tneloms on August 31, 2009 at 8:50 PM

Sure, if you want to let someone else make your decisions for you.

Skandia Recluse on August 31, 2009 at 9:02 PM

One more thing, the article linked by Christina Romer http://www.brookings.edu/~/media/Files/events/2009/0309_lessons/0309_lessons_romer.pdf has nothing to do with the causes of the Great Depression.

I haven’t read the whole link thoroughly but she seems to be repeating the argument we have all heard ad nauseam over the New Deal failing to achieve the desired effect due to balanced budget constraints, in addition to pointing out the the importance of financial recovery etc.

If there is something to this debate I am missing, let me know. But this isn’t a new argument. A conservative would argue that stimulus spending is never effective, for the reasons stimulus spending is currently not working.

Some words of wisdom on stimulus.

There are four ways in which you can spend money.

1) You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money.

2) You can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost.

3) I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch!

4) Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government.

jhffmn on August 31, 2009 at 9:17 PM

Because economics is very complex, and even the experts are rarely able to make strong predictions with any reasonable accuracy. So why would more casual observers be able to?

Just because the whole of economics may be very complex, that doesn’t mean that everything is complex.

If you spent 3 times the money you have, with no way of funding it, you don’t have to be exercising a bias to conclude that it is an economical dumb thing to do, even if you have a Nobel Prize winner with an ideological bias who concludes differently.
You seem to be excluding the possibility that “experts” in their fields may be biased and blur their intellectual eyes to that fact.

. I don’t see why the fact that most internet commenters engage in very low-level forms of “discussion” should impact what you think and say.

What are you basing that on? You seem to be a walking contradiction imo.

In most cases where I’m not an expert, I tend to go with the consensus of the experts.

How do you determine that the “consensus” is actually holding a valid view and not a “consensus” via manipulation to push an agenda?

In what topics do you hold yourself to be an expert?

With regards to economics, I am most certain about conclusions that most economists agree on, such as that free trade is a good thing for the US on almost every single dimension. There are some who disagree, and so I think it’s possible that I’m wrong. With regards to whether the minimum wage helps or hurts the poor, I tend to believe that it hurts the poor because I think that most economists tend toward that conclusion, but I’m much less certain because the issue is less settled among the experts.

Then you seem to hold the view of a lot of the posters on this forum..yet you criticize their powers of deduction. Why do you suppose that is?
Do you really feel that there is much debate among experts whether the minimum wage helps or hinders both business and individuals? Who are some of these experts making that case?

and dismissing all of the experts on the other side as hacks, politically motivated, biased, etc., which is what I often see on HotAir, seems naive and wrong.

You’re seeing things I don’t see then.
Your claim that All are dismissed as hacks, seems to be a false premise.
Attribution Bias?

Itchee Dryback on August 31, 2009 at 9:17 PM

tnetoms
Each of us can cite ‘experts’ till the cows come home, yet few of us would consider anyone else’s expert as being one – but what is an expert in your expert opinion? In mine, only someone that has done it vs. those that only opinionate. We have a government filled with experts of every discription, yet very few have held any job other than at a university, government funded, or think tank location. It’s time to lead, follow, or get out of the damned way. The country is broke and very few experts are showing up for the party. Only those with socialist or marxist theories seem to be allowed a voice.

24K lady on August 31, 2009 at 9:20 PM

. If one side of the debate were constantly making accurate economic predictions, then it would be a different story.

tneloms on August 31, 2009 at 8:50 PM

Why?
If one side made 5 accurate predictions in an area of economics, why would you give credence to that side when making predictions in another area of the same subject that involved different dynamics? Would that be similar to an appeal to authority?

Itchee Dryback on August 31, 2009 at 9:33 PM

Sorry Ed, but Hoover was a link in the chain that exacerbated the Depression. He did not cause it. Go read “Myths of the Great Depression” It’s an excellent read.

Amendment X on August 31, 2009 at 9:39 PM

Boring…the vaccuum puns were a refreshing change of pace. Thank goodness conservatives are not only bright but funny too!

indypat on August 31, 2009 at 8:26 PM

Well it wasn’t much of a thread so that’s why we punned.

Jeff from WI on August 31, 2009 at 9:41 PM

The Clinton administration — and more than a few Republicans — wanted to expand home ownership and distorted the lending markets to create a demand bubble, and essentially another Ponzi scheme in which buyers were encouraged to overreach and then refinance on equity gains

Ed, I realize the Republicans love to blame government interference in the lending industry for the great financial crisis and panic of 2008. But it’s simply not an accurate depiction of what occurred. You really need to talk to people on Wall Street about what happened, not just conservative academics.

As home lending peaked, there was a nearly endless demand for subprime loans on the private wholesale market, which eventually funneled 70% of all subprime loans into derivative products (like CDOs) that had basically zero risk according to Wall Street quants who measured risk. Credit ratings agencies, in turn, gave these subprime-based directive products the highest ratings, leading every bank, institution, hedge fund, and government in the world to pour countless billions of cash into the very derivatives that enabled subprime lending at a massive scale. Other unregulated financial instruments like credit default swaps magnified the problem, creating hundreds in billions in additional losses, taking down giants like AIG.

Representative of this problem was an ongoing debate between Alan Greenspan and Warren Buffet over the last 5 years. Greenspan and just about everyone else on Wall Street firmly believed that derivatives perfectly balanced risk throughout the system and ensured the safety of financial markets. Buffet, on the other hand, described derivatives as instruments of financial mass destruction that, instead of spreading risk, infected the entire system. It’s now clear who had it right. This basic disagreement is a great prism through which to understand as the system unraveled.

If you want to read a highly regarded book about subprime lending and derivatives, you can find several on Amazon. These books explain how derivatives, such as the CDO and CDS, ultimately lead to a massive financial collapse that nearly took the nation into another great depression. Better regulation of derivatives could have prevented the crisis. The markets imploded due to an unprecedented failure to measure risk. Your alternative explanation isn’t seriously discussed by anyone on Wall Street.

http://www.amazon.com/Subprime-Mortgage-Credit-Derivatives-Fabozzi/dp/047024366X

bayam on August 31, 2009 at 9:53 PM

I thought this had already been established?

Hoover didn’t make things worse by leaving things alone, but by monkeying with things.

Aronne on August 31, 2009 at 9:56 PM

Hoover didn’t make things worse by leaving things alone, but by monkeying with things.

It was a combination of both. It’s been assumed for a long time that Hoover’s decision to fix hourly wages greatly deepened the problem. Raising taxes didn’t help either, of course! On the other hand, the failure of the government to create liquidity and support the banking system enabled a vicious cycle that didn’t bring about a fast and ‘natural’ market-driven correction as many people hoped and expected at the time.

Now that modern economists have seen a number of financial collapses in various parts of the world- from Europe to Asia- great American bankers like Bernanke, Paulson, and Geitner have enough wisdom to prevent the sequence of events that lead to the Great Depression from playing out again. While the US may have caused the meltdown, at least we also had the brains and talent to stop it.

bayam on August 31, 2009 at 10:06 PM

tneloms:

Economics may be a potentially complex subject, but that doesn’t mean that basic economic premises are complex. The trouble is that many economists build their theories and opinions on a foundation of premises which any non-economist in possession of basic common sense can see is flawed.

It doesn’t take an academic brain to understand, for example, how manhandling the wages of workers to above the market rate (as unions are fond of doing) will result in either unemployment or an increase in consumer prices, provided that you understand that profits and wages are ultimately the product of revenue. As a concept it’s as simple as understanding that the water level in a bath tub rises when someone sits in it.

Some premises are more empirical in origin and stem from the easily observable, for instance that as consumers we’re overwhelmingly happier with those areas which are driven by the profit motive than those areas that aren’t. We’re generally more satisfied with the quality of computers, dishwashers and cars than we are of public transport or public housing or public education.

As a lay observer I’m not so dazzled by the labels “academic” or “professor” that I immediately assume that they’re privy to some basic truth that I’m not. The ivory towers of academia are full to the rafters of scholars who have proven themselves experts at weaving a bunch of flawed premises into a complex tapestry of what is essentially intellectual bullcrap. If a mathematician starts with the premise that (a + b) + c does not equal a + (b + c) and fashions an incredibly complicated theory from it, I don’t need a phd in pure math to dismiss his conclusions and I don’t care who tries to tell me that I’m not as educated as he.

Of course it’s not as clear cut as this when it comes to economics, but one thing I’ve learned about economics is that economists of a leftist persuasion have as their foundation a bedrock of premises that have been derived not from objective reason or empirical observation, but from their opinion of how they think the world “should be.” They start not with an open mind but with a ton of emotional and moral baggage concerning profits, greed and equality. They accept the Marxist sense of life and internally denounce any premises that seem to promote individualism or (god forbid) “selfishness.”

The trouble is that even when you start with sound premises, once they multiply and amplify and mix together in a complex economic system, it becomes a difficult and complicated process to isolate and identify the real world effect of one premise from another. Hence it’s very hard to prove anything beyond doubt in economics. And hence it’s quite possible for the likes of leftists like Krugman and others to make statements that can’t be disproven 100% but which the rational layman can doubt with some certainty given what he knows about the basics of economics and what he knows about the inherent flaws in leftist/liberal economic thinking.

Sharke on August 31, 2009 at 10:38 PM

Ed, I realize the Republicans love to blame government interference in the lending industry for the great financial crisis and panic of 2008. But it’s simply not an accurate depiction of what occurred. You really need to talk to people on Wall Street about what happened, not just conservative academics.

bayam on August 31, 2009 at 9:53 PM

The trouble is that people “on Wall Street” will be able to tell you “what happened” in very intricate and accurate detail, without actually taking the line of reasoning far back enough. The illusory conditions which allowed such irresponsible behavior to continue unchecked were not the result of deregulation but were created directly by government intervention, i.e. the Federal Reserve. Reisman said it best:

http://georgereisman.com/blog/2008/10/myth-that-laissez-faire-is-responsible.html

Sharke on August 31, 2009 at 11:00 PM

I brought this article up in my ECON class. Macro. Anyways, professor said he never heard of the guy (UCLA Prof.), that I should question the source, and that he never heard of the Journal of Economic Theory.

Hmmmm. He almost laughed out loud when I read the premise that Wilson’s pro-labor policies created the Great Depression.

James on August 31, 2009 at 11:22 PM

I did that in my first post, and then again just now.

neloms on August 31, 2009 at 8:50 PM

It didn’t escape my notice that you never answered my first question…then you disappeared…consumed with more research, I suppose.

Want to answer it now?

AUINSC on September 1, 2009 at 12:35 AM

“The wage freeze effectively raised the cost of labor and, by extension, production,” Ohanian said. “If you artificially raise the price of production, your costs go way up and you pass them on to the customers, and they buy that much less.”

This is a perfect example of minimum wage. We are seeing people who are perfectly willing to take fewer hours or a pay cut to keep their jobs. Everyone has the freedom to do this except for union slaves and those who are in the most need..those trapped by the floor of minimum wage.

Oh, and those evil businesses that are scratching for every dollar they can to stay in business.

Fighton03 on September 1, 2009 at 12:55 AM

Hmmmm. He almost laughed out loud when I read the premise that Wilson’s pro-labor policies created the Great Depression.

James on August 31, 2009 at 11:22 PM

Expect a LOT of closed minds from your professors. Nothing is as good an insulator as the ivory walls of academia.

Fighton03 on September 1, 2009 at 12:57 AM

While the US may have caused the meltdown, at least we also had the brains and talent to stop it.

bayam on August 31, 2009 at 10:06 PM

and yet nothing we have done in the last six months has changed the cycle initially predicted before the election. If anything the cycle is getting extended, again.

Fighton03 on September 1, 2009 at 1:05 AM

Now that modern economists have seen a number of financial collapses in various parts of the world- from Europe to Asia- great American bankers like Bernanke, Paulson, and Geitner have enough wisdom to prevent the sequence of events that lead to the Great Depression from playing out again. While the US may have caused the meltdown, at least we also had the brains and talent to stop it.

bayam on August 31, 2009 at 10:06 PM

A very dim-witted Post hoc ergo propter hoc argument…tag-team with tneloms I assume? He was losing badly and you are losing worse.

AUINSC on September 1, 2009 at 1:08 AM

GM is moving to China! SHHHH!!!

sonnyspats1 on August 31, 2009 at 6:50 PM

You noticed too? They’re not technically “moving” to China – it’s more like they’re splitting into two separate companies that share the same name, with one (the bigger one in terms of sales, production, etc) having its HQ in Beijing. Right under the ChiCom thumb. We get stuck with “GM North America,” which has been sucking like the proverbial “Hoover” for the last 20 years and more. Ask th City of Flint or Delphi Automotive how well that works.

Funny thing is that even the Detroit Free Press had the story as a tiny sidebar on their web page yesterday, compared to some “big scandal” in the UM football program that got the main real estate on the web – and all of the front page in the deadtree format. A scandal which will probably blow over in time for the start of the season.

Priorities? In “Granny’s” MI? Surely you jest.

Blacksmith on September 1, 2009 at 1:23 AM

Herbert Hoover’s reputation as a free-market politician gets serious revision

Hoover was FDR before FDR… both prolonged the Depression.

mankai on September 1, 2009 at 8:14 AM

Why does everyone here think that they know so much about economics that they can be certain that some experts are correct and other experts are incorrect? Shouldn’t you be at least a little uncertain?

tneloms on August 31, 2009 at 6:25 PM

Because we, as capitalists, know just as much as the ‘experts’ who are proven wrong over and over. One defining aspect of conservatives is that we don’t blindly follow ‘experts’.

Vashta.Nerada on September 1, 2009 at 9:33 AM

bankers like Bernanke, Paulson, and Geitner have enough wisdom to prevent the sequence of events that lead to the Great Depression from playing out again. While the US may have caused the meltdown, at least we also had the brains and talent to stop it.

bayam on August 31, 2009 at 10:06 PM

You are assuming that the meltdown has been averted.

Vashta.Nerada on September 1, 2009 at 9:36 AM

In times of economic crisis, the temptation for public officials to do something is both overwhelming and tremendously dangerous.

Reminds me of certain blog moderators who last year scolded those of us who opposed the bank bail outs on the grounds that we had to be seen as doing something, even if it was the wrong thing.

MarkTheGreat on September 1, 2009 at 9:59 AM

Olympia snowe

texaninfidel on August 31, 2009 at 6:07 PM

Please do us all a favor, and just go away.

Ed, I do believe that this kind of abuse may justify the ban hammer. Spamming the same post to every single thread. Sheesh.

BTW, the tactics advised by this guy wouldn’t work anyway, these offices have caller ID, they know your area code before they pick up the phone.

MarkTheGreat on September 1, 2009 at 10:04 AM

I think it was Gerald Ford with his WIN campaign but good point.

fourdeucer on August 31, 2009 at 6:20 PM

Nixon had wage and price controls.
Ford’s WIN program wasn’t much more than cheerleading.

MarkTheGreat on September 1, 2009 at 10:06 AM

How do you know they made it worse and prolonged it? Many economists believe they helped,

tneloms on August 31, 2009 at 6:44 PM

The vast majority of economists are in agreement that the policies of Hoover and FDR made the Depression longer and worse, if they didn’t cause it in the first place.

Yes, there are a few who disagree, but their arguments have been largely discredited inside the economics community.

MarkTheGreat on September 1, 2009 at 10:10 AM

He sucks like a Hoover Deluxe. Wasn’t Hoover a cross dresser?

Geochelone on August 31, 2009 at 6:54 PM

That was J. Edgar Hoover. Different guy entirely.

MarkTheGreat on September 1, 2009 at 10:10 AM

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