Paul Samuelson's Take on the Great Depression
By David Henderson
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.