Krugman Gets Hoover Wrong
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.
Apr 5 2013 at 5:11pm
[Comment removed pending confirmation of email address and for policy violations. Email the email@example.com to request restoring your comment privileges. A valid email address is required to post comments on EconLog and EconTalk.–Econlib Ed.]
Apr 5 2013 at 5:22pm
“When the Great Depression struck, many influential people argued that the government shouldn’t even try to limit the damage.”
There’s a reason he refers to “Mellonism” and not “Hooverism.” I see no lines in that column in which Krugman makes the claim that you attribute to him or even implies it. Did Hoover say that Mellon urged him to “Liquidate labor, liquidate stocks, liquidate the farmers”? Yes. As that is the only inference Krugman makes about Hoover, I don’t see where he gets it wrong.
Lawrence H. White
Apr 5 2013 at 5:24pm
It’s true that Hoover in his memoirs describes Mellon’s advice in the terms Krugman quotes. But there’s no (other) evidence that Mellon ever gave such advice. (In context, it’s clear that Hoover was caricaturing Mellon to paint himself as an enlightened activist by contrast.) Mellon’s public speeches don’t include statements remotely similar. Mellon as ex officio FOMC member voted for rate cuts in 1930. He urged Hoover to increase federal construction spending.
I think the “many” in Krugman’s first sentence is inaccurate. But at least he didn’t try to implicate Hayek and Robbins, as others have.
For details see my article here.
David R. Henderson
Apr 5 2013 at 5:33pm
I don’t see where he gets it wrong.
Here’s where he gets it wrong. With his last statement in the quote, he’s implying that this mistaken thinking in the 1930s was followed. It wasn’t.
Also, by the way, See Lawrence H. White’s comment above.
F. Lynx Pardinus
Apr 5 2013 at 5:40pm
Lawrence H. White:
Krugman in 2011:
Apr 5 2013 at 6:24pm
The amazing thing is that this is such an obvious falsehood that he keeps repeating. There comes a point where there is a difference between ignorance and purposefully attempting to mislead your readeres.
Apr 5 2013 at 6:28pm
I do like the hat tip!
Apr 5 2013 at 8:53pm
This is why Professor Henderson points to Krugman as “clever”. A clever argument begins by providing information that will be agreeable to most. The most clever arguments conveniently leave out information that damage the promoted theory.
Apr 5 2013 at 9:39pm
Bravo, F. Linx, excellent quote.
Apr 5 2013 at 10:40pm
Let’s see, liquidate labor, 30% unemployment, liquidate stocks, down 90%, liquidate farmers, large numbers of bankruptcies, unending bank failures, maintaining the gold standard, higher taxes trying to maintain a balanced budget in the face of this. No, they weren’t all his intent but he managed to do so in spite of that, but most of all he was ineffectual. With government only 10% of the economy, it would have required dramatic, gargantuan, inventive efforts to counter it, and those he wasn’t up to. Some things helped, some hindered, but mostly they were just inadequate to the nature and scale of the devastation.
Apr 6 2013 at 6:07am
[Comment removed pending confirmation of email address and for ad hominem remarks. Email the firstname.lastname@example.org to request restoring your comment privileges. A valid email address is required to post comments on EconLog and EconTalk.–Econlib Ed.]
Apr 6 2013 at 6:35am
You like the quote from Krugman provided by “lynx”, which certainly shows that Krugman recognizes that it is Hoover who is describing Mellon’s alleged views. However, the issue that D. Henderson is underscoring is that regardless of who may have said what, Mellon’s alleged policy advice was never followed (for good or ill).
Apr 6 2013 at 7:43am
The point the Krugman was making was that back in the “bad old days” some influential people were recommending austerity during periods of high unemployment. Everybody supposedly recognized that policy was wrong except that after 2008 again some influential people were recommending austerity during periods of high unemployment. That Hoover may have “sexed up” his quote of Mellon is in fact support for Krugman’s point that by the time Hoover was writing, the idea was supposedly discredited.
Apr 6 2013 at 7:51am
I understand Henderson’s sensitivity to “getting Hoover wrong” in that there are still people who blame Hoover for the Depression rather than the Fed. That’s fine as far as it goes, but misunderstanding Krugman does not really help.
David R. Henderson
Apr 6 2013 at 9:23am
@F. Lynx Pardinus,
Thanks for the quote, which, as you note, is from 2011, not from the article I’m criticizing. So Krugman himself recognizes Larry’s point, but he doesn’t let his readers today, in 2013, in on that.
That Hoover may have “sexed up” his quote of Mellon is in fact support for Krugman’s point that by the time Hoover was writing, the idea was supposedly discredited.
It’s not support, though, for the implication that Krugman leaves the reader, namely, that Mellon’s advice was followed.
I understand Henderson’s sensitivity to “getting Hoover wrong” in that there are still people who blame Hoover for the Depression rather than the Fed.
No, you don’t. I blame Hoover as well as the Fed. That is not at all the issue here. The issue is that Krugman implies that Hoover followed Mellon’s advice and, even if this was his actual advice, which Lawrence H. White above questions, Hoover didn’t follow it.
Apr 6 2013 at 11:28am
The way the trick works, and it is a trick, is that Krugman confesses to an implied possible error, “I used to quote these .. with a certain smugness”, and then elides into the bit about not repeating the errors of the thirties. This links quite opposite things as the putative errors.
Apr 6 2013 at 12:21pm
That’s the thing. Modern macroeconomics hasn’t shown how wrong they were. They’ve asserted that they were wrong, but that’s not really the same thing.
David R. Henderson
Apr 6 2013 at 12:21pm
I don’t understand your comment.
Apr 6 2013 at 12:35pm
I am analyzing the mechanics of Krugman’s verbal sleight of hand. When I suggest I made an error, or was too dismissive of the chance of it being an error, it suggests that said putative error is the subject of my remarks. So if in the same breath I say “Let’s not repeat the errors of the thirties” I have suggested these are the same errors without saying so. In Krugman’s case the putative errors, as you rightly note, are very different.
“You and I have debated Lend Lease. In discussions about foreign affairs I have sometimes erred on the side of intervention. Let’s not repeat the errors of Lend Lease.” I can say all that truthfully. But for me the real error of Lend Lease is that it did not come soon enough, and was not as generous as it should have been. That’s pretty much the opposite putative error my quoted paragraph implies. Same trick.
Apr 6 2013 at 2:26pm
Just to further a point David made:
Those of us who insist on getting Hoover right AGREE with the Krugmans of the world that Hoover bears significant responsibility for the Great Depression (in addition to the Fed for creating the boom and deepening the bust and FDR for lengthening it). What we disagree with Krugman about is WHY. Hoover deserves blame because his intervention made matters worse, not his “austerity.”
Apr 6 2013 at 8:19pm
Open market operations in which the Fed can bid on government debt were finally made legal in a 1934 amendment to the Act. But yes, the Fed began such buying during WWI and continued into the 20s, presumably with Mellon’s aid and advice, while the Treasury was happy to forget to assess the steep fines it was supposed to exact for this law-breaking.
Farming had already collapsed during the 20s when Wilson’s “Grain to feed the world at any price!” war effort was no longer necessary. That land bubble set up the use-then-disuse conditions that primed it for the dust bowl years.
We may be unable to finger just one culprit for the Depression, but it seems clear that the central plans all failed, or fell short somehow.
That should not surprise. It should stand as a lesson.
Patrick R. Sullivan
Apr 7 2013 at 12:29pm
It’s very hard to see what Krugman thinks is the point. Hoover didn’t take Mellon’s advice and there was disaster. So, Krugman thinks Hoover was wrong to ignore Mellon?
Apr 8 2013 at 12:29pm
[Comment removed pending confirmation of email address. Email the email@example.com to request restoring this comment. A valid email address is required to post comments on EconLog and EconTalk.–Econlib Ed.]
Comments are closed.