David R. Henderson  

Paul Samuelson's Take on the Great Depression

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In jumping around through the blogosphere last night, I came across this quote from Paul Samuelson, in an interview he did in 2009 with Conor Clarke:

Well, let me give you a bit of boring autobiography. I came to the University of Chicago on the morning of January 2, 1932. I wasn't yet a graduate of high school for another few months. And that was about the low point of the Herbert Hoover/Andrew Mellon phase after October of 1929. That's quite a number of years to have inaction. And I couldn't reconcile what I was being taught at the university of Chicago -- the lectures and the books I was being assigned -- with what I knew to be true out in the streets. [italics added]

Notice that Samuelson thought, along with many others at the time, that Hoover's problem was inaction. This at a time when Hoover had dramatically increased federal government spending, signed the Davis-Bacon Act, tried to persuade businessmen to keep wages high, and signed the Smoot-Hawley tariff bill. See Steven Horwitz, "Hoover's Economic Policies," in David R. Henderson, ed., The Concise Encyclopedia of Economics, Liberty Fund, 2008, for more evidence of Hoover's interventionist economic policies.

Samuelson can be easily forgiven for thinking, as a 16-year-old, what many people around him thought. But there is no excuse for his not knowing, in 2009, the true story of Hoover's administration.

I've already blogged about another aspect of this interview.

This is not to take anything away from Samuelson. It's simply to point out that even one of best economists of the last half century, a man with both a wide and a deep understanding of economic theory, economic history, and the history of economic thought, blew it big time on one of the most important parts of our economic history.

I've expressed much of my admiration for Samuelson here.

Also, for evidence of his deep knowledge of the history of economic thought, in which he also earns style points in responding to criticisms, see his critique of Robert P. Murphy's academic article on Eugen von Bohm-Bawerk.


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CATEGORIES: Economic History




COMMENTS (9 to date)
Richard A. writes:

Hoover was inactive where it counts and that's monetary policy.

David R. Henderson writes:

@Richard A.
Hoover was inactive where it counts and that's monetary policy.
And you can be sure that that’s not what Samuelson meant.

AS writes:

The be fair, the myth that Hoover was laissez-faire (which in turn exacerbated the Depression, until FDR's New Deal solved everything) is also repeated in US public schools and history textbooks.

Don Boudreaux writes:

AS: You're correct. Much of the history taught in most schools today is mistaken, even on relatively simple factual matters such as this one. (By the way, I suspect that the myth that Pres. Hoover pushed laissez-faire policies is taught not only in government schools but in most private schools as well.) But surely one expects of a Nobel-laureate economist (especially one who was alive and aware during the period) knowledge of economic history that is more accurate than that of a typical high-school teacher.

Mr. Econotarian writes:

Regarding monetary policy, there is a Hoover speech, October 4, 1932, in Des Moines that is very telling to his view on devaluation:

"Going off the gold standard in the United States would have been a most crushing blow to most of those with savings and those who owed money, and it was these we were fighting to protect.

Going off the gold standard is no academic matter. By going off that standard, gold goes to a premium, and the currency dollar becomes depreciated. In our country, largely as a result of fears generated by the experience after the Civil War and by the Democratic free-silver campaign in 1896, our people have long insisted upon writing a large part of their long-term debtor documents as payable in gold.

A considerable part of farm mortgages, most of our industrial and all of our Government, most of our State and municipal bonds, and most other long-term obligations are written as payable in gold."

[It took the audacity of FDR to think it was Constitutional for the Federal government to force every "gold clause" in every contract to be null and void, and that is just what FDR did with the Gold Clause ban in 1933 along with the devaluation.]

LD Bottorff writes:

Economists, scientists, and Nobel Laureates are all human and subject to being swayed by the popular prejudices of the day. Our news, entertainment, and education re-enforces the prejudices that are currently popular. Samuelson had a hard time letting go of the prejudice of his youth.

Floccina writes:

He should have said ineffective action appears rather like inaction on the street.

One might hear someone today say of Government: "They are not doing anything about fall test scores."
They are doing lots of ineffective stuff at huge cost but that appears like doing nothing to many.

Floccina writes:

We should agree and say he should have taken radical action and eliminated the federal reserve and the green back and gone to free banking but instead he did nothing to alleviate the unnecessary pain.

vikingvista writes:
Hoover was inactive where it counts and that's monetary policy.

You mean when the Fed chair's term expired during Hoover's term, Hoover didn't nominate someone else?

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