By Arnold Kling
most of the ignorance that plagued policymakers during the 1930’s was conceptual. They did not understand the difference between lost resources and under-utilized resources. They did not understand the relationship between financial markets and markets for goods and services. And they did not understand the issue of deflation.
…the New Deal consisted of a mixture of business-bashing, pain-sharing, and attempted central planning. By today’s standards, the results were abysmal. Even relative to what was known at the time, it was shockingly misguided and counterproductive.
Several of the economists interviewed in Randall Parker’s book discuss the issue of what economists and policymakers were thinking during the 1930’s. One theme is that monetary doctrines, such as the gold standard and the real bills doctrine, condoned what Milton Friedman and Anna Schwartz famously called “the great contraction” of the money supply.