Feed on
Posts
Comments

Some more evidence:

Why wasn’t the Depression followed by a vigorous recovery, like every other cycle? It should have been. The economic fundamentals that drive all expansions were very favorable during the New Deal. Productivity grew very rapidly after 1933, the price level was stable, real interest rates were low, and liquidity was plentiful. We have calculated on the basis of just productivity growth that employment and investment should have been back to normal levels by 1936. Similarly, Nobel Laureate Robert Lucas and Leonard Rapping calculated on the basis of just expansionary Federal Reserve policy that the economy should have been back to normal by 1935.

So what stopped a blockbuster recovery from ever starting? The New Deal. Some New Deal policies certainly benefited the economy by establishing a basic social safety net through Social Security and unemployment benefits, and by stabilizing the financial system through deposit insurance and the Securities Exchange Commission. But others violated the most basic economic principles by suppressing competition, and setting prices and wages in many sectors well above their normal levels. All told, these antimarket policies choked off powerful recovery forces that would have plausibly returned the economy back to trend by the mid-1930s.

The most damaging policies were those at the heart of the recovery plan, including The National Industrial Recovery Act (NIRA), which tossed aside the nation’s antitrust acts and permitted industries to collusively raise prices provided that they shared their newfound monopoly rents with workers by substantially raising wages well above underlying productivity growth. The NIRA covered over 500 industries, ranging from autos and steel, to ladies hosiery and poultry production. Each industry created a code of “fair competition” which spelled out what producers could and could not do, and which were designed to eliminate “excessive competition” that FDR believed to be the source of the Depression.

Our research indicates that New Deal labor and industrial policies prolonged the Depression by seven years.

That was Harold Cole and Lee Ohanian on Monday.

21 Responses to “Why Did the Great Depression Last So Long?”

  1. […] recovery forces that would have plausibly returned the economy back to trend by the mid-1930s.''http://theunbrokenwindow.com/2009/02…-last-so-long/ […]

  2. Marcus Miska says:

    Hi! I simply want to give you a big thumbs up for the excellent info you’ve got right here on this post. I’ll be coming back to your website for more soon.

  3. Hello there! Do you know if they make any plugins to safeguard against hackers? I’m kinda paranoid about losing everything I’ve worked hard on. Any recommendations?

  4. Hello! I know this is kinda off topic but I’d figured I’d ask. Would you be interested in exchanging links or maybe guest authoring a blog post or vice-versa? My blog discusses a lot of the same topics as yours and I believe we could greatly benefit from each other. If you might be interested feel free to send me an e-mail. I look forward to hearing from you! Great blog by the way!

  5. Paid Proxy says:

    In the great scheme of things you get an A+ just for effort and hard work. Where exactly you misplaced us was in your particulars. As it is said, the devil is in the details… And it could not be much more accurate in this article. Having said that, permit me tell you exactly what did give good results. The text is actually highly powerful which is most likely why I am taking the effort to opine. I do not make it a regular habit of doing that. Second, whilst I can notice the jumps in reasoning you come up with, I am definitely not confident of how you appear to unite your ideas which make your conclusion. For now I will yield to your point but trust in the near future you actually link the facts better.

  6. I just added this blog site to my feed reader, great stuff. Cannot get enough!

  7. Hey there are using WordPress for your site platform? I’m new to the blog world but I’m trying to get started and set up my own. Do you require any coding knowledge to make your own blog? Any help would be greatly appreciated!

  8. I’m really enjoying the theme/design of your web site. Do you ever run into any internet browser compatibility issues? A few of my blog readers have complained about my blog not operating correctly in Explorer but looks great in Safari. Do you have any recommendations to help fix this problem?

  9. Hello there! Would you mind if I share your blog with my facebook group? There’s a lot of folks that I think would really appreciate your content. Please let me know. Many thanks

  10. 599382 171271Terrific paintings! That will be the type of info that are meant to be shared about the net. Shame on the seek for no longer positioning this publish higher! Come on more than and consult with my web site . Thank you =) 514241

  11. 679469 47082Woh I like your posts , saved to fav! . 239179

  12. 621472 848081In the event you have been injured as a result of a defective IVC Filter, you need to contact an experienced attorney practicing in medical malpractice cases, specifically someone with experience in these lawsuits. 58859

  13. Woah! I’m really digging the template/theme of this website. It’s simple, yet effective. A lot of times it’s very difficult to get that “perfect balance” between superb usability and visual appearance. I must say you have done a very good job with this. Also, the blog loads very quick for me on Internet explorer. Outstanding Blog!

  14. 335156 199711I like this weblog its a master peace ! Glad I detected this on google . 137073

  15. medartix.com says:

    Say, you got a nice blog.Really looking forward to read more. Great.

  16. Hi, i read your blog from time to time and i own a similar one and i was just curious if you get a lot of spam responses? If so how do you prevent it, any plugin or anything you can suggest? I get so much lately it’s driving me crazy so any help is very much appreciated.

  17. I am not sure where you are getting your info, but great topic.I needs to spend some time learning much more or understanding more.Thanks for excellent info I was looking forthis info for my mission. 0mniartist asmr

  18. Hi there, just became alert to your blog through Google, and found that it is really informative. I am gonna watch out for brussels. I will be grateful if you continue this in future. Numerous people will be benefited from your writing. Cheers!

  19. western porn says:

    I like the valuable info you provide to your articles.I will bookmark your blog and check oncemore right here regularly. I am relatively sure I’llbe informed many new stuff right here! Best of luck for thefollowing!

  20. Buy Proxies says:

    some genuinely select content on this website , bookmarked.

  21. 派傳單 says:

    It’s wonderful that you are getting ideas from this article as well as from our argument made here.

Leave a Reply