Arnold Kling  

Revisiting the 1930s

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From the Vault: My Response to... Nothing to the Rumor...

1. Stephen Williamson gives a platform to Harold Cole and Lee Ohanian to defend a recent controversial op-ed.


most of the increase in per-capita output that occurred after 1933 was due to higher productivity - not higher labor input. The figure shows total hours worked per adult for the 1930s. There is little recovery in labor, as hours are about 27 percent down in 1933 relative to 1929, and remain about 21 percent down in 1939. But increasing aggregate demand is supposed to increase output by increasing labor, not by increasing productivity, which is typically considered to be outside the scope of short-run spending/monetary policies.

So, were the 1930s a jobless recovery? Recall that one of my favorite books of the past year is Alexander Field's history of the 1930s as A Great leap Forward in terms of productivity.

[note: you may have seen this already, since Jim Hamilton and Tyler Cowen both linked to it. I am doing more posting on a delayed basis, so expect me to be "late" to pick up on a story. Also, Scott Sumner offers a rebuttal:


Hours worked went from being 27% below normal in 1933, to only 17% below normal in 1937, the cyclical peak.

He chides Cole and Ohanian for choosing 1939 as the endpoint for their analysis.]

2. Timothy Taylor expresses rare (for him) frustration with the view that Herbert Hoover was a budget balancer. It is a myth that dies hard.

For more on Hoover see a new paper by Steven Horwitz.


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CATEGORIES: Economic History



COMMENTS (3 to date)
marcus nunes writes:

Cole & Ohanian were deceptive in even more ways given their own data:
http://thefaintofheart.wordpress.com/2011/09/30/more-evidence-on-how-cole-ohanian-were-deceptive/

R. richard Schweitzer writes:

"But increasing aggregate demand is supposed to increase output by increasing labor, not by increasing productivity, which is typically considered to be outside the scope of short-run spending/monetary policies."

That is another departure of AD "theory" from reality.

In the 1930's in order to meet the "demand" for well drilling capacity, but seeing the need to hold down the labor requirement to a limited "contingent" to which he could assure subsistence, my father designed and developed "mobile" or "portable" drilling rigs that progressively eliminated the need for erecting and dismantling drilling towers, among other advantages. Work was created at the aviation engineering facility that constructed his designs and subsequent modifications. But his crews became more effective without increase in numbers and by elimination of "pick-up" labor when setting up or taking down.

In an "efficient economy" true demand will be met by the most effective (usually highest margin) means, which generally would not expand increase of labor inputs. More shoes from better leather cutting tools,faster stitching machines, better glues, etc.

Increased demand does not, per se, generate increased labor input by generating product output.


Scott Gustafson writes:

Note that both Hoover and FDR believed in high wages. Both had policies that kept wage rates higher than the equilibrium. The logical response on the part of a business to high wage rates would be to increase productivity.

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