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The course to audit this semester at Berkeley would be Brad DeLong’s Econ 115. He’s been drilling down on the Great Depression and doing his best to extract lessons that are useful for our current circumstances. In particular, DeLong’s October 1 lecture “The Industrial Financial Business Cycle and the Great Depression” (which can be downloaded here) is worth a gander. It includes a review of the attitudes that leading economists of the Depression Era (including von Hayek and Schumpeter) developed in real time, and how this affected the situation.
At its nadir, the Depression was collective insanity. Workers were idle because firms would not hire them to work their machines; firms would
not hire workers to work machines because they saw no market for goods; and there was no market for goods because workers had no incomes to
spend. Orwell’s account of the Depression in Britain, The Road to Wigan Pier, speaks of “several hundred men risk[ing] their lives and several hundred women scrabbl[ing] in the mud for hours… searching eagerly for tiny chips of coal in slagheaps so they could heat their homes.” For them, this arduously-
gained “free” coal was “more important almost than food.” All around them the machinery they had previously used to mine in five minutes more than they could gather in a day stood idle.
DeLong highlights the historical lessons that were unlearned by leading economists of the day. He takes us on an excursion, courtesy E.M. Forster, of Britain’s financial crisis of 1825—peaked, as DeLong highlights, by a series of episodes that parallel America’s rollercoaster ride in the last decade—in which the Bank of England intervened aggressively to avert a catastrophe. DeLong summarizes:
Since 1825, the first rule in a financial crisis has been for the government to rescue the banking system—to try to prevent or moderate or offset the
collapse of risk tolerance. And it was this rule that was broken in the Great Depression. And that is why the Great Depression was so great.
The core of the lecture describes the analyses of leading lights of the Austrian school and applied by President Hoover. The view that prevailed was that of “liquidationists,” like von Hayek, who asserted that the Depression was unavoidable: there was only the choice between Depression now or still harsher Depression later. “Curiously, the Great Depression was pretty much the only time that the ‘liquidationist’ view carried the day.”
DeLong’s piece helps us understand the remarkable consensus that existed among economists in favor of a bailout in the last quarter of the Bush presidency, and it gives us a strong feel for the risks of the “do nothing” attitude of bailout critics on the right. These are high-stakes decisions on which the lives and fortunes of hundreds of millions hang. In the time of tea-bag histrionics, it’s a pleasure to read a calm, literate rehearsal of the major issues and the options available.
More from Scott Horton:
Conversation — August 5, 2016, 12:08 pm
Sidney Blumenthal on the origins of the Republican Party, the fallout from Clinton’s emails, and his new biography of Abraham Lincoln
Conversation — March 30, 2016, 3:44 pm
Joseph Hickman discusses his new book, The Burn Pits, which tells the story of thousands of U.S. soldiers who, after returning from Iraq and Afghanistan, have developed rare cancers and respiratory diseases.
Flor Arely Sánchez had been in bed with a fever and pains throughout her body for three days when a July thunderstorm broke over the mountainside. She got nervous when bolts of light flashed in the sky. Lightning strikes the San Julián region of western El Salvador several times a year, and her neighbors fear storms more than they fear the march of diseases — first dengue, then chikungunya, now Zika. Flor worried about a lot of things, since she was pregnant.
Late in the afternoon, when the pains had somewhat eased, Flor thought she might go to a dammed-up bit of the river near her house to bathe. She is thirty-five and has lived in the same place all her life, where wrinkled hills are planted with corn, beans, and fruit trees. She took a towel and soap and walked out into the rain. Halfway to the river, the pains returned and overcame her. The next thing Flor remembers, she was in a room she didn’t recognize, unable to move. As she soon discovered, she was in a hospital, her ankle cuffed to the bed, and she was being investigated for abortion.
Average amount of time a child spends in Santa Claus’s lap at Macy’s (in seconds):
Beer does not cause beer bellies.
Following the arrest of at least 10 clowns in Kentucky and Alabama, Tennesseans were warned that clowns could be “predators” and Pennsylvanians were advised not to interact with what one police chief described as “knuckleheads with clown-like clothes on.”
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“Matt was happy enough to sustain himself on the detritus of a world he saw as careening toward self-destruction, and equally happy to scam a government he despised. 'I’m glad everyone’s so wasteful,' he told me. 'It supports my lifestyle.'”