Economic Illiterates of the Great Depression

I've been wondering about this one too; maybe here's another way to think of things. If things are going well, then people should be happy with whatever policy is shown to work. By the fact that it works, it's perceived to be good policy. If things go badly, people would rationally conclude that current policy is bad and try to change it. But, that gives no guidance as to what good policy would look like. In the search for good policy, politicians or citizens might muck things up even further.

If this is the case, we should be thankful that we didn't take an Argentine route in the 1930s. It may also lead to the possibility of self-fulfilling crises; even if the underlying policy were sound, policymakers would be pressured to change course when things go wrong.

This, of course, assumes that institutional development is a trial-and-error discovery process rather than a direct optimization process. It's easy to break good institutions, hard to build them.

Good article. I've always thought the biggest problems arise when you get dashed rising expectations. As long as people have no hope they remain docile. But if you raise hopes, and then dash them is when you get big disruptions to the social fabric.

Of course all those people who beleive that the reason communism fell was Reagan telling Khrushchev to tear down this wall will not like your thinking.

Seems that Coughlin's ideas on wages weren't any worse than the Roosevelt Administration's, and his monetary policy would have been significantly better than what the Fed did.

So he believed in the real bills doctrine and advocated a wage subsidy as a stimulus policy for a depression economy? I'm with Patrick on this one; though I have no particular regard for Coughlin I don't see why this marks him out as an "economic illiterate".

Since "the talking heads of the 1930s" included FA Hayek, JM Keynes and AC Pigou, I put it to you that a) one year olds cannot run circles around them and b) the quality of economic thought is not higher today than it was then.

IWhen I count my blessings, one of them is that I missed the Great Depression.

Illiterate? I can't imagine a true economist not interested in a tanked stock market, 25% unemployment.

Perhaps a year or two of unemployment would increase your literacy.

[quote]Since "the talking heads of the 1930s" included FA Hayek, JM Keynes and AC Pigou, I put it to you that a) one year olds cannot run circles around them and b) the quality of economic thought is not higher today than it was then.[/quote]

I think he means that there are more people literate in economics today, not that everyone alive today can match Keynes, Hayek, Pigou et al.

As far as Coughlin's view, I don't know if printing a bunch of money en masse would've been that much better than restricting it as the Fed had done. Certainly you have to think that just bailing out farms by printing billions of dollars in money and expecting the mortgages that the government had backed them is just plain silly...