Bart Wilson  

A Crime Beyond Denunciation

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The works of the roots of the vines, of the trees, must be destroyed to keep up the price, and this is the saddest, bitterest thing of all. Carloads of oranges dumped on the ground. The people came for miles to take the fruit, but this could not be. How would they buy oranges at twenty cents a dozen if they could drive out and pick them up? And men with hoses squirt kerosene on the oranges, and they are angry at the crime, angry at the people who have come to take the fruit. A million people hungry, needing the fruit--and kerosene sprayed over the golden mountains.

And the smell of rot fills the country.

Burn coffee for fuel in the ships. Burn corn to keep warm, it makes a hot fire. Dump potatoes in the rivers and place guards along the banks to keep the hungry people from fishing them out. Slaughter the pigs and bury them, and let the putrescence drip down into the earth.

The Grapes of Wrath, John Steinbeck
I had used the double auction experiment to teach the lesson of price floors many times prior to teaching Humanomics, but never as effectively as when in the context of reading chapter 25 of The Grapes of Wrath. It is one thing to use a graph and an experiment to explain why some people do not get to buy a commodity because the government is supporting higher prices for farmers, but it is quite another when that same policy is ruthlessly enforced while people are starving.

PriceSupport2.jpg
In the above graph from the classroom experiment, the red triangles are offers to sell and blue triangles bids to buy with the restriction that all bids and asks must be greater than or equal to $4.75. The blue step function is the induced demand for poker chips and the red step function the induced supply. When I conduct the experiment, I go around, after the buyers stop buying, and purchase all the poker chips that the sellers are willing to sell at the price floor. Then I put them in a bowl and announce, in front of the buyers who haven't bought anything, that I'm burning them. Cheesy, I know, but it raises the important point for discussion that government officials and farmers had convinced themselves that they were doing the right thing when people were starving right in front of their very eyes. Somehow they reasoned aside their humanity with misguided intentions to jumpstart the economy. Their anger towards the starving blinded them from the immediate, gut-wrenching consequences of their actions.

Whenever the New Deal is glorified, remember this:

There is a crime here that goes beyond denunciation. There is a sorrow here that weeping cannot symbolize. There is a failure here that topples all our success.
The Grapes of Wrath


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COMMENTS (11 to date)
LD Bottorff writes:

Matt Ridley has denounced the ethanol fuel requirements as essentially doing the same thing. I agree.

Bob Murphy writes:

Great stuff, I use this excerpt a lot too. But Mr. Wilson, have I been right in telling people that the irony is that Steinbeck thought this was the nature of capitalism at work? I.e. Steinbeck wouldn't have attributed this outcome to the crime of the New Deal, right?

Jeff writes:

Steinbeck was a protege of Lincoln Steffens, who famously declared after a visit to the Soviet Union that he had "seen the future, and it works."

Troy Camplin writes:

My commentary on Steinbeck on these policies that he did, in fact, incorrectly interpret as the result of greed (though I cannot think it his fault, given the fact that if people knew the government was forcing farmers to do this, there would have been a revolution):

http://www.popecenter.org/commentaries/article.html?id=2881

Bart writes:

That is my sense, Bob. I read him much like I do Gabriel Kolko on the railroads.

Andrew_FL writes:

@Bob Murphy-Yeah, it's an incredible irony.

I'll be honest. I can't stand Steinbeck. I read The Pearl in High School. Hand to god, worst story I have ever read, I wanted to die afterwards. It was obvious reading that story that Steinbeck had hard left wing, even communist beliefs.

david writes:

American farmers were overproducing - well before the New Deal's AAA set forth any artificial scarcity, there were already wheat and meat rotting in the fields because it was worth less than the cost of harvest and slaughter. This state of overproduction lasted until World War 2, in fact - the AAA's restrictions still did not restrict overproduction enough. Remember that food prices did not return to their pre-Depression level until much later.

The main problem was the distribution of the ability to afford the output. That is to say, so many people were becoming so poor that they outpaced the decline of food prices. Steinbeck was seizing on the former problem, not the latter.

MingoV writes:

I'm reminded of the simplified descriptions (that I modified) of economic & political systems. The bureaucracy system fits the blog post.

Socialism: You have two cows. The government takes one of them and gives it to your neighbor (who has no idea how to raise or milk a cow).

Communism: You have two cows. The government takes both of them, puts them on a collective farm, and makes you wait in line to get some spoiled milk.

Fascism: You have two cows. The government tells you how to raise them and how to milk them, inspects them regularly, taxes you to pay for the inspectors, and lets you sell the milk only at specified places and times.

Naziism: You have two cows. The government takes both of them, shoots you, cremates your body, and uses your ashes to fertilize the pasture.

Bureaucracy: You have two cows. The government buys one of them and shoots it, milks the other, buys the milk, and then pours it down the drain.

Capitalism: You have two cows. You sell one of them and buy a bull.

EclectEcon writes:

This is a brilliant extension of using the double-auction as a teaching device. Thanks for posting it.

ThomasH writes:

Roosevelt's deficits were not large enough and the Fed's monetary policy was too tight. That's what produced mass suffereing not misapplied microeconomics.

Essen writes:

@MingoV

Communism: You have two cows...
In communism how do you have two cows in the first place?

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