Jeff Madrick (author of The Case for Big Government) and I go head-to-head over the New Deal. Here is my first salvo; at the bottom of each round is a link to the next event.
If you want to join the circu–scholarly debate, then here is a forum dedicated to it.
{ 34 comments }
Wow, that guy is a jerk. Especially in his last post. Why does he have to act like that? Seriously, the guy acts like a child.
And he makes no real attempt to answer your questions. Samuelson predicted a great depression of 1946, and from his point of view it made sense to do so. Why did that not emerge? No answer.
Then his labor union stuff is a joke. Oooh, Bob Murphy doesn’t want workers to earn what they deserve! Is this what passes for economic science to a mainstream stooge like this? And then the comparison of the ’30s to the ’50s and ’60s — first, he of course completely disregards the post hoc ergo propter hoc objection, and secondly he thinks a gradual evolution in the 50s and 60s should have had the same effect as a one-shot rise in wage rates by 13.7% in one year in 1938.
Tom Woods is right, Madrick is egregious. Typical left-liberal more interested in scoring points against his ideological adversaries than having honest, intelligent debate.
Bob should address this howler:
“Murphy pulls the old “Economics 101†trick. I am not sure where he took Economics 101, but what they also teach—maybe it’s Economics 201—is that recessions feed on themselves. As workers lose jobs, they buy less and businesses invest less. The vicious circle spirals downward as businesses fire more workers or reduce wages—and so on. ”
http://www.publicsquare.net/article_new-deal-setting-the-record-straight-301.htm
His claim that recessions “feed on themselves” makes no sense from the standpoint of Econ 101, *if* prices are allowed to adjust and markets allowed to clear (something governments in the ’30′s worked actively to prevent). As Henry Hazlitt noted in his great anti-Keynes book, Keynes essentially “refuted” the classical economists by distorting what they wrote.
In his last post, he mentioned Fed policy, probably thinking it was “tight.”Someone should remind Madrick that the NY Fed kept its discount rate at1.5 percent from May 1931 onwards to October. After the crash the Federal Reserve also lowered its discount rate from 6 to 4.5 percent. Securities held by the Federal Reserve also increased from $296 million to $326 million. Other things fell, obviously, but how is this not inflationary? Also, in in 1930, discount rates fell from 4.5 percent to 2. Even if the money supply fell slightly in the year, the Fed did its best to inflate. Its easy to look back in history and say that they didn’t do enough, but how were they suppose to know what is enough? They didn’t know by how much the money supply was falling while they were inflating. How come Madrick doesn’t mention that investment was almost socialized throughout the era? Even in the Hoover years! Even if the Fed was so “tight” during those years, how can one not blame the U.S. government for taking up funds?
I agree with Tom. He refuses to really engage in the debate.
I may be biased, but if someone who doesn’t know any economics read this debate HAS to side with Robert just from being informative and polite. Madrick is struggling and it shows.
“Wow, that guy is a jerk. Especially in his last post. Why does he have to act like that? Seriously, the guy acts like a child.”
haven’t we all had exchanges with people like this? especially online. Why agree to the thing if you aren’t even going to take it seriously and just phone in a bunch of old talking points.
I believe Madrick would be better served arguing for his case for moral legitimacy rather than efficiency and growth, but even then he would fail. Big government always leads to the few becoming too rich and too powerful, thus too much corruption.
Also, for the empirically minded, didn’t the recession of 1920-21 prove that a recession doesn’t cause a death spiral if nothing is done?
Ke wrote:
“I believe Madrick would be better served arguing for his case for moral legitimacy rather than efficiency and growth, but even then he would fail. Big government always leads to the few becoming too rich and too powerful, thus too much corruption.”
Not to mention the more direct and, to my mind at least, more compelling moral argument that socialism always involves institutionalized (and thus legitimized) theft! This not only hurts the people who earned the stolen (“redistributed”) wealth economically, and hurts the economy as a whole due to malinvestment and the inefficiencies involved in bureaucratic redistribution, but it also corrupts us morally by making the masses believe that theft is acceptable.
what’s mandrick’s fixation with friedman?
So here you have it! The legacy of Milton Friedman kept alive by socialists!
Both Murphy and Madrick only casually mention the most serious error or the Great Depression. First was Smoot-Hawley against an international debt situation that was strangling the whole world. Then the massive tax increases Hoover placed on the American people to pay for his deficits. Then finally Roosevelt torpedoed Cordell Hull’s masterful agreement at the London Economic Conference of 1933 resulting in the nations of the world defaulting on their WWI debts and the rise of Hitler in Germany.
Today even Austrians are so wrapped up in demand side thinking that they forget that Austiran economics was primarily about microeconomic elements coming together to create a macro-environment. It was not the FED or Keynes or most of the other things people love to talk about that created the disaster. It was the government creating wedges between traders and vitrually halting exchange both domestic and international.
All the demand side stuff of Keynes and Friedman was simply much ado about nothing, illusion (see L. Albert Kahn).
Honestly, I was sort of impressed by Madrick. For a Liberal, he did a decent job of laying out why, as Mises said, you have to with the theoretical argument because the facts can be twisted to back any theory. His book, which I am reading now, is absolute garbage, however.
What a great debate, I hope it continues. Don’t let him just throw those one-liners and leave! Although they don’t serve any intellectuals merits it allows the writer to hind behind a veil of smug. A few one-liners here and there will make the novice heads start bobbing! Make him explain his positions
I also love how Austrians’ stand ready to swarm! I think we need a hand signal to “throw up†like the Bloods or Crips. I’m thinking something like an big M
some great points here about the depression. as for the issue of the debate itself, I would just point out that most people, like 99% of the world basically, cannot fathom the concept of libertarianism. If you say anti war stuff you are hit with anti democrat talking points and if you say free market stuff you are are subject to stuff like mr madrick’s rhetoric. to democrats there are just republicans and vice versa.
In Rose Wilder Lanes book “the discovery of freedom” she talks about the paganism vs montheism and that I think is what libertarian, anarchists or free thinking people in general are up against. it messes with these peoples reality for a person to be both anti warfare and anti welfare.
I once called into an NPR show about the growing divide in the country. I mustered pretty lamely a point that was like well why don’t we have the government do less stuff so we have less to fight over. the author was completely baffled. in his mind the 2008 election was about either going to war with Iran or having socialized medicine. those were the only two possible outcomes.
bottom line: Robert Murphy doesn’t exist in the mind of guys ilke Madrick. Meynard Keynes and milton friedman are like the only economists
Good points, Lester. It’s pretty obvious from Madrick’s responses that he either knows he’s full of it or is convinced he’s right. Either way, he isn’t going to trouble himself by engaging in a fair debate. His insistence on attacking “anti-New Dealers” rather than addressing Murphy and his argument is bizarre. (After Murphy called him out, he directed his insults at “Robert Murphy and anti-New Dealers.”) People like Madrick are so committed to an us vs. them mentality that they are incapable of engaging another person in an honest and critical discussion of anything. All they can do is fall back on tired generalizations.
Nonetheless, it’s encouraging that Murphy was able to lure Madrick into the ring (even if he couldn’t quite deliver a knock-out blow). If nothing else, by refusing to play fair, Madrick provides damning evidence of his own intellectual shortcomings. If the likes of Madrick are repeatedly exposed as the intellectual frauds they are, it’s possible some of their followers will begin to lose faith.
lester wrote:
“I once called into an NPR show about the growing divide in the country. I mustered pretty lamely a point that was like well why don’t we have the government do less stuff so we have less to fight over.”
Unfortunately, what is causing the divide in our country is whether or not the government *should* do “less stuff” or, like, more stuff.
Seriously, though, socialists who think the government needs to take care of everybody would not be happier if the government were to do less. In their minds, it is the proper function of the government to do pretty much everything. In my mind, it is the proper function of the government to do very little. And some here would rather it do nothing at all. There is no position that would make everybody happy or prevent a cultural divide. The only way to prevent that would be to roll back the Gramscian “Long March Through The Institutions” that has taken over our educational system, media, etc. That’s not likely to happen anytime soon.
“If you say anti war stuff you are hit with anti democrat talking points and if you say free market stuff you are are subject to stuff like mr madrick’s rhetoric.”
True, but would like to poing out that one doesn’t *have* to be always opposed to war to be a libertarian, either. I’m not 100% sure whether the wars in Iraq and Afghanistan were necessary or not. But I find the ideas of most knee-jerk anti-war libertarians to be every bit as naive as those of the knee-jerk anti-war socialists. After all, 3,000+ innocent civilians did get killed, as opposed to the 2,117 military personnel killed in Pearl Harbor. If that doesn’t justify some sort of military action in our defense, how many deaths would it take for a war to be justified to such libertarians?
Russ,
“how many deaths would it take for a war to be justified to such libertarians?”
It is of no matter how many deaths there were. Acts of aggression are only justified against those who committed the act.
Let me ask you this: Are Afghanis now justified in bombing you and your family in retaliation for the acts of your country’s military (i.e. the bombing of wedding parties)?
I guess that holding true to moral principles is just naive…
Russ,
Here’s a Mises quote handily appearing on the “Quotable Mises” sidebar:
“That Liberalism aims at the protection of property and that it rejects war are two expressions of one and the same principle.”
Jero wrote:
“It is of no matter how many deaths there were. Acts of aggression are only justified against those who committed the act.”
If a mob boss orders a hit, the mob boss is just as guilty as the shooter. Similarly, the Taliban “sponsored” those who commited the act, so I see the war against the Taliban as justified. And I can’t see why keeping al Quaeda from re-establishing a base in Afghanistan is unjustified, either. For the same reason, going after any other government that is known to sponsor terrorists is justified as far as I am concerned, although perhaps not prudent.
“Let me ask you this: Are Afghanis now justified in bombing you and your family in retaliation for the acts of your country’s military (i.e. the bombing of wedding parties)?
I guess that holding true to moral principles is just naive…”
No, but assuming that the US military *intended* to hit wedding parties is perhaps a bit much (assuming that the stories about wedding parties aren’t just left-wing propaganda of a piece with the stories of Belgian babies on bayonets). After all, we’re now there because the Afghan government wants our help to keep all the radical nutjobs at bay.
And yes, this is *exactly* the kind of knee-jerk anti-war rhetoric that I was talking about. I guess we really are just supposed to sit around and wait to get nuked. Oh my goodness, we can’t go to war! Somebody might get hurt! *GASP* When a nation has become so squeamish that it refuses to fight to defend itself, that is the beginning of the end.
Russ,
For the sake of discussion, let’s say that the US military did bomb kill innocent women and children. How can those killings be justified by citing the murderous acts of unrelated individuals who happen to be their countrymen?
And would the relatives/friends/countrymen of those innocent victims be justified in bombing you and your family because of the acts of your countrymen? According to your logic, this would be entirely permissible, for you (i.e. your country) “sponsored†the killing of innocents.
The bad thing about war is not that somebody gets hurt, the bad thing is that INNOCENT people get hurt. It is basic to libertarianism that such killings are impermissible.
And yes, this is *exactly* the kind of knee-jerk anti-war rhetoric that I was talking about. I guess we really are just supposed to sit around and wait to get nuked. Oh my goodness, we can’t go to war! Somebody might get hurt! *GASP* When a nation has become so squeamish that it refuses to fight to defend itself, that is the beginning of the end.
Russ, many of us who post here identify as anarchists or minarchists. So, appeals to defending the nation probably won’t elicit much support. That the Afghan government (and I use the term loosely) wants our help is irrelevant. Besides, what does helping the Afghan government deal with internal agitators have to do with defending the US? What exactly does it mean that the Taliban “sponsored” the Al-Quaeda terrorists who committed the 9/11 attacks? Al-Quaeda received support from donors all over the world including wealthy donors in countries such as Saudia Arabia, Egypt, and Pakistan. In other words, from our so-called allies. What’s more, the US govt didn’t recognize the Taliban as the legitimate rulers of Afghanistan. So even if the Taliban was the sole supporter of Al-Quaeda, their support didn’t justify the invasion of Afghanistan because the Taliban were not the legitimate rulers of Afghanistan. Nor did the Taliban control the entire country (warlords did and continue to control significant portions of Afghanistan). I’m not sure what your understanding of libertarianism is, but I know you’ll encounter a lot of disagreement regarding war from the LvMI crowd. Anyway, we’re highjacking the comments section with something rather off-topic. We should probably take this to the forums. Best regards!
Caveman wrote:
“Russ, many of us who post here identify as anarchists or minarchists. So, appeals to defending the nation probably won’t elicit much support.”
I identify as a minarchist myself. Part of minarchism, or at least my version of it, is the belief that national defense is one of the few legitimate functions of a state, and that only a state can perform it effectively.
“So even if the Taliban was the sole supporter of Al-Quaeda, their support didn’t justify the invasion of Afghanistan because the Taliban were not the legitimate rulers of Afghanistan.”
Non sequitur; the Taliban were the de facto rulers of Afghanistan, and they gave aid and comfort to al Quaeda, so the invasion was legitimate. Besides, if they were not legitimate rulers, all the more reason to get rid of them.
“Anyway, we’re highjacking the comments section with something rather off-topic. We should probably take this to the forums. Best regards!”
True enough. I will let the topic go, because I really should be spending my time studying for my work instead of debating politics. The Internet is just too darned addictive! Regards.
Prof Murphy,
I think you could save yourself some time and quote Rothbard verbatim from “America’s Great Depression”.
To people like Madrick (and Friedman) the 1920s apparently never happened.
You also need to take him to task when he says FDR can’t be responsible for the Great Depression because it started before he took office. He does not even realize that depressions are defined AFTER they take place. I guess Madrick thinks that in 1929 people just magically knew that the Great Depression had begun and it was not at all possible that the New Deal helped to extend the recession and turn it into a depression.
Russ wrote “Non sequitur; the Taliban were the de facto rulers of Afghanistan, and they gave aid and comfort to al Quaeda [sic], so the invasion was legitimate. Besides, if they were not legitimate rulers, all the more reason to get rid of them.”
Those two sentences are non sequiturs themselves. The “aid and comfort” was part of their cultural duties, and they readily agreed to stop just as soon as the USA offered evidence that Al Qaida were involved in and guilty of the terrorist acts – only, the USA invaded instead. So giving “aid and comfort” is not sufficient to justify what was done to them, any more than in the case of Dr. Mudd. As for the Taliban not being legitimate rulers, that only gives those ruled legitimate grounds for overthrowing them; it would be morally neutral for outsiders to assist those, but no more. There is certainly no justification for overthrowing in such a way as to set up something else that is illegitimate.
to dick fox:
mises endorses rothbard’s inflationary scenario of the 1920′s america, by citing agd in a footnote of human action (p561)
“If the synchronous increase in the supply of money (in the broader sense) had been less plentiful than it really was, a tendency toward a drop in the prices of all commodities would have taken effect. As an actual historical event credit expansion was always embedded in an environment in which powerful factors were counteracting its tendency to raise prices. As a rule the resultant of the clash of opposites forces was a preponderance of those producing a rise in prices. But there were some exceptional instances too in which the upward movement of prices was only slight. The most remarkable example was provided by the American boom of 1926-29.(7)”
7. Cf. M.N. Rothbard, America’s Great Depression (Princeton, 1963).
Yeah, Dick… to say “It was not the FED or Keynes or most of the other things people love to talk about that created the disaster” is a little strange. Austrians point to the expanding money supply of the 20s (the boom) as laying the seeds of the bust. And they consider that the most important contributor to the bust by far.
Smoot Hawley and taxes prolonged the depression, they didn’t cause the depression. The Fed absolutely did.
Revisit AGD and maybe Human Action as well.
russ- I ‘m sorry if I implied that ALL libertarians were anti war. my point was that mainstream people don’t understand ideologies that don’t fit distinctly into democrat or republican.
The Statist crackpot has apparently never heard of the Austrian explanation for the Great Depression, nor the fact that Mises and Hayek called it months before it happened. So much for the “unbiased” research that went into the book, since he blames them for instilling free-market fundamentalism into current thinking.
According to Murphy, deficit spending is bad for the economy. However, Madrick makes the point that FDR’s deficit spending was greater than that of Hoover (and Murphy agrees), and yet the economy performed better under him than Hoover.
Murphy does not address this point.
Rowdy, Madrick assumes that the economy has no natural ability to recover from depressions. If the gov doesn’t step in, we will all die. But a century of depressions prove just the opposite. The economy always recovered quickly. The first Great Depression in modern history happened when the state decided to rescue us.
The Great Depression lasted longer and went deeper than any depression in history. So it would not be irrational to think that state intervention made it that way, since no other recession before and without state intervention was as bad.
What of the long depression of 1873-76?
In any case, the comparison is between the ‘Hoover depression’ and the ‘FDR depression’. Murphy makes the case that Hoover was an interventionist to explain the Hoover depression. Fine.
But FDR was a bigger interventionist, yet Hoover’s depression was worse.
Why?
Rowdy
Murphy does not claim that Hoover’s and Roosevelt’s interventions caused the Great Depression, but that the made it Great. The depression was caused by inflation during the 1920s and exacerbated by government meddling once the correction process began. And Murphy does talk about the distinction between Hoover’s and Roosevelt’s deficits. He shows that the difference between the two was not all that great, so the correlation between higher deficits and a better economy is very weak.
And with the Long Depression, consider that it only lasted four years, whereas the Great Depression dragged out over more than a decade.
to thinker & rowdy:
actually, if you follow robert higgs’ research, the great depression continued right through world war two; the wartime data sets are corrupted by rationing etc.
there are other papers by higgs on this topic, but here’s one debunking the war recovery myth:
http://www.libertarianpapers.org/articles/2009/lp-1-4.pdf
My understanding of the ABCT is that there are perhaps four stages in the business cycle: an inflationary boom is followed by a credit crunch, which leads to a period of correction, which is subsequently followed by the inevitable recovery. Right?
If so, then the Austrian perspective on the Great Depression is that: due to government interventions, the economic correction under Hoover was steeper than it otherwise would have been, and the economic recovery under FDR was shallower that it would otherwise have been.
Now, the Keynesian perspective seems more simplistic with just two stages: economic growth or economic decline. Since the economy was contracting under Hoover, but growing under FDR, FDR’s interventionist policies must have been the cause of economic expansion.
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