Believe those who are seeking the truth. Doubt those who find it. Andre Gide


Sunday, March 8, 2009

Brad DeLong: Bad Economist, Good Historian?

In the lead up to his debate with Michele Boldrin on fiscal policy, DeLong cannot hide his sense of pride in proclaiming that "I am not a macroeconomist; I am an economic historian."

As the debate unfolded, he (unintentionally, no doubt) supplied us with ample evidence confirming his lack of theoretical training (to be more precise, his reliance on those "really useful ad hoc models" that appear sufficient to organize anyone's thinking on macroeconomic phenomena).

At one point, for example, he presented some data showing that employment was falling even in states that were not heavily exposed to subprime mortgages. The implication we were presumably to draw from this fact is that the current downturn is nothing more than an old-fashioned decline in "aggregate demand" (the cause of which is conveniently ignored, as this requires some deep-thinking). The corollary is that a large government fiscal stimulus is obviously desirable to mitigate the (unexplained) decline in private-sector "demand."

There are, of course, competing theories that are consistent with what an historian (or econometrician) might interpret as an "exogenous decline in aggregate demand." Many of these theories are no more or less crazy than DeLong's preferred theory (his Econ 101 macroeconomics principles course notes). He apparently does not feel the need to temper his opinion by the humility that any good scientist should feel by the difficulty associated with discriminating among several competing hypotheses. Yes, there is no doubt that DeLong is a bad scientist.

But then, DeLong is not a scientist; he is a self-proclaimed historian. Someone who documents previously unknown facts and provides data that challenges preconceived notions. Someone like Joel Mokyr, for example (read his delightful The Lever of Riches). I am sure that DeLong has made useful contributions in his field (actually, I really enjoyed reading his piece on America's peacetime inflation). But I now have a little cloud of doubt over whether we should trust him even here.

I am not an economic historian; but I have done some reading on economic history. And in particular, I have done a fair bit of reading on Herbert Hoover; whose opinions and policies were shamelessly distorted by DeLong in his debate with Boldrin. Bob Murphy drives this point home splendidly. Consider, for example, what DeLong said:
"Now Prof. Boldrin is following a very old trail, all right, his trail was in fact the ruling theory behind the Hoover Administration's policies in the 1930s. And to quote from President Herbert Hoover's autobiography, during his administration economic policy was made by quote "the leave-it-alone liquidationists headed by my Secretary of the Treasury Mellon, who felt the government must keep its hands off the economy and let the slump liquidate itself."

Inexplicably, DeLong fails to inform his audience of what follows this quote in Hoover's autobiography:
"But other members of the Administration, also having economic responsibilities- Under Secretary of the Treasury Mills, Governor Young of the Reserve Board, Secretary of Commerce Lamont and Secretary of Agriculture Hyde--believed with me that we should use the powers of government to cushion the situation."

Any good (or honest) economic historian must know that Hoover was no laissez-faire apologist. As the world's foremost mining engineer at the turn of the last century, Hoover saw first-hand and disapproved strongly of the speculative manias that frequently arose in his industry. As head of the Belgian Relief effort of WW1, Hoover orchestrated a massive interventionist effort that literally saved the lives of tens of millions Europeans. As Secretary of Commerce in the 1920s, he lobbied frequently for banking reform (lobbying efforts that were repeatedly quashed by the Governor of New York; none other than FDR) and warned of a growing mania in stock prices. His interventionist tendencies in the early days of the Great Depression were frequently blocked by the Democratic Congress (FDR accused him of being a reckless spendthrift). Most of "FDRs" New Deal policies were lifted wholesale from Hoover himself. If you do not believe this, then consider this quote from one of FDR's early advisors (Raymond Moley, writing in Newsweek, June 14, 1948):
"When we all burst into Washington...we found every essential idea (of the New Deal) enacted in the 100-day Congress in the Hoover administration itself. The essentials of the NRA, the PWA, the emergency relief setup were all there. Even the AAA was known to the Department of Agriculture. Only the TVA and the Securities Act was drawn from other sources. The RFC, probably the greatest recovery agency, was of course a Hoover measure, passed long before the inauguration."

Is DeLong a good economic historian? I'll let you be the judge.

2 comments:

  1. You are embarrassing yourself.

    Moley is saying--correctly--that there had been a lot of good staffwork done under the Hoover administration for what became New Deal programs. Moley is not saying that there was no difference between Hoover and FDR.

    Unfortunately for Hoover and for the country, almost all of the ideas were blocked by Treasury Secretary Andrew Mellon--and by Herbert Hoover, who backed Mellon. Afterwards, in his memoirs, Herbert remembered or wanted to remember that he had been squarely on the side of Mills, Young, Lamont, and Hyde, but it was not so.

    Don't embarrass yourself. It's not worth it.

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  2. Brad:

    I am perfectly willing to embarrass myself if it means that I might learn something.

    I did not claim that Moley was saying that there was no difference between Hoover and FDR (where did I say this? It appears now that you have embarrassed yourself). In fact, there was a big difference between the two: Hoover preferred implementation via state and local authorities, whild FDR preferred implementation through the federal authority.

    And if you read your history more carefully, you'll discover that it was the Democratic Congress during Hoover's administration that blocked Hoover's policies.

    And your comment about Mellon shows me that you did not read the link I provided to Bob Murphy. But never let ignorance get in the way of a good slight, I suppose. Well done.

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