Bryan Caplan  

Sumner, Wilson, Harding, Keynes

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In his latest one-two punch, Scott Sumner...

1. ...explains why Woodrow Wilson was the worst president in U.S. history:
...Wilson's economic policies were perhaps the worst in American history.  He presided over the creation of the Fed and the income tax, which went from 0% to something like 70% while he was president.  In the long run the Fed may have been a good thing, but there can be no doubt that 1913 was premature, we didn't know anywhere near enough about monetary policy to warrant a central bank meddling in the gold standard.


Wilson had arguably the most destructive foreign policy in American history.  When there is a delicate balance of power in Europe you don't want to meddle unless you plan to stay there permanently.  Yes, I know Wilson did intend the US to hang around, but he should have known we were an isolationist country before he brought us into WWI.  All he did was assure that the strongest country in Europe lost.
2. ...rescues the erudite Warren Harding from historians' complete lack of perspective...
What was Harding's great crime?  A few of his aides took bribes.
3. ...mocks Keynes for the ages:
[W]ithout help from his rich daddy and rich friends, this cocky, arrogant, smart-aleck would have fallen on his face, ended up digging ditches somewhere and we would never have heard of him.
4. ...then tells us why his ad hominem against Keynes ends in macroeconomic wisdom:

From now on I will never believe anyone who tells me that Keynes was a great investor.  Does this matter?  It shouldn't, but unfortunately it does.  If his investment reputation was like Fisher's (calling stocks fairly priced in 1929) nobody would take seriously his Chapter 12 in the General Theory where he tries to shoot down the efficient market hypothesis.  That is the chapter that has a lot of nonsense about musical chairs, beauty contests, and the seasonality of ice prices.

Comments and Sharing

COMMENTS (9 to date)
sammy writes:

why of course EMH worked fabulously well in the case of Citi, now didn't it... oops Citi stock dropped another cent, wonder what news the efficient market was reacting to!!

Spot the number of mistakes in the paragraph from Sumner's article
"I’d go to Vegas and put $5 million on numbers 1 through 34 on the roulette wheel. The odds are roughly 90% I’d win ... "

Can someone teach Sumner some probability please?

one-two punch indeed

Mike Gibson writes:

On Wilson, lest we forget, in his last year, the man had (I think) two strokes. He then conspired with his wife, who became a de facto president. She would scribble notes from his bedroom and send them out as official statements and orders.

WIlson campaigned on peace in 1916 and gallantly entered war in 1917. A bureaucratic progressive, a racist, a xenophobe, intolerant of dissent (see Eugene Debs), he represents a watershed in modern politics: the intellectual mountebank.

mark writes:

don't agree with all he said but it was very thought-provoking - thanks for the lilnk.

Robert Simmons writes:

Two blanks on a roulette wheel, so we have 34/38 = 89.5%.

I'd call 89.5% roughly 90%, so where's the mistake? I suppose he's ignoring taxes....

J Cortez writes:

The roulette wheel analogy is stupid, but his entire post is excellent.

Devin Snead writes:

Let's also not forget that Wilson re-instituted slavery (a.k.a. conscription).

Greg writes:

Don't know much about Wilson's economic policies, but Sumner's analysis on that point seems right. I'm puzzled by the foreign policy analysis. Sumner lays WWII at Wilson's feet but doesn't even bother with hand-waving about the counterfactual. Europe was a basket case (or powder keg, pick your favorite cliche) before and after WW I. It's not at all clear that the US's involvement changed the odds of a rematch.

As for efficient markets, come on. Isn't it more obvious now than ever that efficient markets theory is at best a very, very imprecise approximation of reality? Investors pay attention to market movements and other investors' actions, resulting in a feedback loop which can take the market very far from equilibrium. Maybe Sumner wants to claim that perfect competition exists, too? Silly.

Ak Mike writes:

Greg - Wilson's responsibility for WWII is probably right. Wilson brought the U.S. into WWI - the Germans would otherwise have won, or at least achieved a compromise peace. Don't forget that Russia had left the war around the time America got in - and Germany was bringing the 1/2 of their army that had been fighting in the eastern front to the west.

If Germany had won, there would certainly have been no Versailles Treaty, no Nazis, and no Hitler. Hitler and the Nazis pretty clearly started the second world war. It's always possible another war of some kind would have occurred in Europe following a German victory in WWI, but highly unlikely to have been on the scale and with the horrible consequences of WWII.

Granite26 writes:

I printed out the Wilson part and put it up on the wall of my cube

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