Krugman Gets Hoover Wrong
By David Henderson
No one whose opinion I respect doubts that Paul Krugman is very clever. Here’s a recent example from his column in yesterday’s New York Times, titled “The Urge to Purge”:
When the Great Depression struck, many influential people argued that the government shouldn’t even try to limit the damage. According to Herbert Hoover, Andrew Mellon, his Treasury secretary, urged him to “Liquidate labor, liquidate stocks, liquidate the farmers. … It will purge the rottenness out of the system.” Don’t try to hasten recovery, warned the famous economist Joseph Schumpeter, because “artificial stimulus leaves part of the work of depressions undone.”
Like many economists, I used to quote these past luminaries with a certain smugness. After all, modern macroeconomics had shown how wrong they were, and we wouldn’t repeat the mistakes of the 1930s, would we?
Every single sentence in the above quote is correct. So why do I say that Krugman gets Hoover wrong?
Because contrary to the impression Krugman leaves the reader, and obviously wants to leave the reader, Hoover didn’t take Mellon’s advice. See more here.
HT to Mark Thoma.