Amity Shlaes is all the vogue with conservatives these days.
Eric from Edge of the American West gives us the run down on how denialism works.
It’s not just Shlaes versus a famously shrill Nobelist and some dude at an ag university; it’s Shlaes versus the accepted academic consensus.
As previously noted, if you were a sufficiently honest and competent researcher located like Amity Shlaes near any number of world-class reference libraries simply out to find out the unemployment rate in the 1930s, you would not find the data Shlaes cites; you would find, in the authoritative reference work, an explanation of why it’s not best to cite the data Shlaes cites. Shlaes has to go out of her way to find other data.
Shlaes likes to pretend it’s the other way around—that she’s using authoritative data while Krugman and I are citing data from an old but (she graciously concedes) “useful” paper by Michael Darby. This is not true. Darby’s paper is the opening point in a decades-long process of scholarship that extends through published papers by several other economic historians including Robert Margo and David Weir that culminates in the authoritative reference work, Historical Statistics of the United States, publishing Weir’s series and not Shlaes’s preferred data. This is what academic work is supposed to accomplish: establish by research and the adversarial process of debate and peer review a consensus. Shlaes is defying it.
This may seem rather similar to the method used to deny that tobacco use causes cancer, or that human action promotes global warming: by making something seem complicated, by saying, well, there’s disagreement, Shlaes and other denialists undermine the entire academic enterprise.
Its important to go read an explanation of why it’s not best to cite the data Shlaes cites, because it gives a run down on what happens when you look at Unemployment as a percentage of civilian labor force by economist Stanley Lebergott in 1964:
And wow, that looks bad, doesn’t it? The recession of 1937-38 almost completely wipes out any gains of the previous few years. It’s almost as if the New Deal didn’t do anything for anyone, much.
A lot of people looked at these numbers without reading the notes on how they were constructed and concluded just that.
Then in 1976, an economist named Michael R. Darby wrote an article with the delightfully self-explanatory title, “Three-and-a-Half Million U.S. Employees Have Been Mislaid.”2 What Darby did, you see, was read the notes. Here’s what Lebergott had to say about counting unemployment in the 1930s:
These estimates for the years prior to 1940 are intended to measure the number of persons who are totally unemployed, having no work at all. For the 1930’s this concept, however, does include one large group of persons who had both work and income from work—those on emergency work. In the United States we are concerned with measuring lack of regular work and do not minimize the total by excluding persons with made work or emergency jobs. This contrasts sharply, for example, with the German practice during the 1930’s when persons in the labor-force camps were classed as employed, and Soviet practice which includes employment in labor camps, if it includes it at all, as employment.3
Did you catch that? People who painted murals for the WPA fall into the same category as internees in Mauthausen or the gulag. So they count as unemployed!
One could say a few things about that.
(1) Wow, that’s a lot of ideology to cram into a single data series;
(2) if you’re using the unemployment data to answer the question, “did the New Deal help people,” then this data set is going to give you the wrong answer, because it’s going to show people suffering unemployment who in real life had a job, as Lebergott says;
(3) but what if people in emergency work acted like the unemployed—i.e., they were looking for a job and
(4) what about the “real” economy—the private industrial economy—how did it do?Now, as it happens it looks like the answer to (3) is, mainly they didn’t—people who had an emergency job acted like they had a job (perhaps because they had a job) and probably shouldn’t count as unemployed.4
And if you don’t count these people who held jobs as unemployed, you get a different picture of unemployment in the 1930s.
You also hear a lot about private investment being stifled by the new deal. Which George Will tried to pull on ABC one sunday morning a while back
On ABC's "This Week" earlier, George Will explained his belief that FDR financial/regulatory policies discouraged investment and created an environment in which the "depression became the Great Depression." Fortunately, Will was sitting next to Paul Krugman. To hear Will tell it, the Roosevelt administration stood in the way of investors. In a fairly devastating 45 seconds, Krugman not only set the record straight, but explained that it was FDR's desire to balance the budget and cut federal spending that contributed to a decline in 1937.
Brad Delong follows up with a neat graph and says:
I have never been able to make any sense at all of the right-wing claim that the New Deal prolonged the Great Depression by creating a "crisis of confidence" that crippled private investment as American businessmen feared and hated "that Communist Roosevelt." The crisis of confidence was created by the stock market crash, the deflation, and the bank failures of 1929-1933. Private investment recovered in a very healthy fashion as Roosevelt's New Deal policies took effect.
The interruption of the Roosevelt Recovery in 1937-1938 is, I think, wel understood: Roosevelt's decision to adopt more "orthodox" economic policies and try to move the budget toward balance and the Federal Reserve's decision to contract the money supply by raising bank reserve requirements provide ample explanation of that downturn. And once those two factors had run its course the continuation of Roosevelt's policies was no obstacle to an investment recovery driven by war-related exports monetary expansion produced by capital flight from Europe.
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