Nov 16th, 2008 at 7:15 pm
Will v. Krugman on the Depression
Nice work as the Nobel Prize winning economist takes on the conservative columnist. Will argues that New Deal policies made the Depression worse. Krugman retorts that the New Deal was working nicely until FDR’s concern with balanced budgets and fiscal restraint created a new recession. Conservatives are right, in other words, that the “everything was terrible until FDR came along and fixed the Depression” story is wrong, but FDR’s problem was being too conservative
Now obviously what Krugman has to say here isn’t the last word on the subject. This is TV sound bites, not a scholarly journal of economic history. But this is why it’s important to have smart, engaged progressives on television. If only there were more.
73 Responses to “Will v. Krugman on the Depression”
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November 16th, 2008 at 7:35 pm
Conservatives will fight with all they have on this issue of history. They think that if they are wrong on this, their entire small government philosophy collapses. How sad that they do not see that a bit of reasoned discussion would allow a sensible form of conservative economics to endure. Krugman is no socialist. He knows that in good times, markets achieve efficient outcomes provided there are rules to the game (regulation but not undue interference from Government). However, in bad times, the ordinary rules change. “Balancing the books” sounds sensible but it isn’t in the current crisis. We must have Governments investing heavily in infrastructure projects now, even if it means huge deficits. That does not mean that we always need to have this approach, just when the system fails. The current crisis does not prove that capitalism itself is a failure. It only proves that capitalism without rules is a failure.
November 16th, 2008 at 7:44 pm
Well it is not really fair because Will is a pundit, a talking head supposed to be able to talk about anything and evverything on TV. And here he is, making a point about Economics just before… a Princeton professor and Nobel Prize winner in Economics.
Likewise, on NBC Andrea Mitchell was even more stupid than usual. Her arguments against unions and the European position during the world financial summit made absolutely no sense.
November 16th, 2008 at 7:48 pm
I think you embedded the wrong clip. This is from March.
November 16th, 2008 at 7:51 pm
By the way the Green Room this week was great and hilarious, watch Will and Donaldson trash Palin:
http://abcnews.go.com/Video/playerIndex?id=6265136
November 16th, 2008 at 7:52 pm
It is wonderful to see such a bald side-by-side comparison of intellect vs. crank.
November 16th, 2008 at 7:53 pm
And this is the section Matt meant (near the end):
http://abcnews.go.com/Video/playerIndex?id=6264740
November 16th, 2008 at 8:06 pm
You posted the wrong link. Here’s the roundtable you’re referring to.
November 16th, 2008 at 8:06 pm
You guys are quick. Now I look like an ass.
November 16th, 2008 at 8:09 pm
Ok, then what’s the end game?
The debt became troubling in the mid 30’s, spending was cut, the economy receded, so spending was increased again. And then the fascists came, and we really didn’t give a hoot about deficits and debt. But we were able to pay it back because
1) Most of the industrial capacity of the world outside North America was destroyed by 1946.
2) We convinced Americans to take ‘below-market’ interest rates on that debt through ‘buy liberty bonds’ propaganda and the like.
I’ll grant you, at present, it looks like the world is indeed giving us ‘below market’ rates. But how long would that last if we really turned on the tap?
November 16th, 2008 at 8:09 pm
Actually the Second World War, which included massive government spending, ended the Great Depression. James MacGregor Burns, in his Pulitizer Prize winning biography of Roosevelt, has suggested that if Roosevelt would have adopted the theories of John Maynard Keynes than the Depression could have been over in the thirties.
November 16th, 2008 at 8:12 pm
I wonder what the first link is when you google “trust fund scumbag?”
November 16th, 2008 at 8:17 pm
I’ll grant you, at present, it looks like the world is indeed giving us ‘below market’ rates.
You know 3-month T-Bills went into negative interest rates for awhile? I couldn’t wrap my mind around that, but it’s because if you are a sovereign wealth fund or mutual fund or whatever that has billions or trillions of dollars and the banks are collapsing it’s better to take a negative rate of return than watch your money vanish.
I’m not sure what it would take for the world to decide the U.S. government wasn’t the last pin to drop. If it does fall apart, we really have bigger problems than anyone can imagine.
November 16th, 2008 at 8:19 pm
For the curious, Will argued that FDR made a depression into the Great Depression by creating a questionable regulation system which kept investors from being willing to invest, in say, new production.
Krugman retorted that given that you had 25% unemployment and existing factories were operating at fractions of their own capacity, you don’t need to invoke government as a reason why investors weren’t interested in backing new production.
Will pretty much shut up after that.
November 16th, 2008 at 8:28 pm
The Nobel Prize in economics should have gone to somebody like Eric Jantzen or Robert Prechter. Their predictions and warnings, made years ahead of actual events, have turned out to be spot on. But in doing so they gave voice to ideas the plutocracy didn’t want to hear. So while they get grudging recognition at best, the conventional, unimaginative thinkers like Bernanke and Krugman walk off with the plumb jobs and prizes.
November 16th, 2008 at 8:33 pm
Is that a joke, Kafka?
November 16th, 2008 at 9:27 pm
Of course its always great to see someone who honestly and openly on these shows, but it doesn’t change who’s asking the questions!
November 16th, 2008 at 9:32 pm
oh yea…and it should be up to the moderator to predict arguments on both sides and research them…and apply some common sense as to what one should expect…SUNDAY News is strategy and accountability at the same the time…why don’t moderators understand this? OH yeah, they worked their asses off and kissed major butt to get where they are, and they have friends, and a social class to uphold…blah blah…media is like the military industrial complex…too many variables having an unverifiable amount of influence…we’re FUCKED people
November 16th, 2008 at 10:00 pm
Nice work as the Nobel Prize winning economist
KRUGMAN IS NOT A NOBEL-PRIZE WINNER. There is no Nobel Prize in economics. He won the Bank of Sweden Prize that tries to pass itself off as a Nobel Prize.
If there were any justice, Peter Schiff would have won the Bank of Sweden Prize in Economics this year.
November 16th, 2008 at 10:32 pm
I would very much like to congratulate Professor Krugman for having won the Nobel Prize. It is incredibly prestigious to win a Nobel Prize. Professor Krugman deserves a Nobel Prize more than any other economist in history.
November 16th, 2008 at 10:32 pm
The correctness of Krugman’s narrative is obvious — and would be so even if we could ignore the expertise gap between him and Will: the depression was finally, completely banished, after all, only after the government got crazy with stimulus via the massive deficit spending necessitated by the war. Actual history, in other words, is consistent with what Krugman is arguing for, and loudly militates against what neo-Hooverites advocate.
I only hope the Obama administration can withstand the public pressure whipped up by the media — many of whose members are as equally clueless (and/or as equally without personal need of government stimulus) as George Will.
November 16th, 2008 at 10:46 pm
So while they get grudging recognition at best, the conventional, unimaginative thinkers like Bernanke and Krugman walk off with the plumb jobs and prizes.
That’s just stupid. Krugman’s work in the field was groundbreaking, and arguably revolutionary.
KRUGMAN IS NOT A NOBEL-PRIZE WINNER. There is no Nobel Prize in economics. He won the Bank of Sweden Prize that tries to pass itself off as a Nobel Prize.
That’s even stupider. It doesn’t “pass itself off” as a Nobel Prize. Its official name is The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. It’s a type of Nobel prize — with a different history and pedigree than the other five.
November 16th, 2008 at 10:56 pm
Krugman and Obama have great minds, and I hope they don’t try to “wrap them around” anything. Onward………
November 16th, 2008 at 10:56 pm
I never got this idea that WWII ended the depression. How does spending 40% of a nation’s wealth on unconsumable goods possibly make people better off? Sure it cut unemployment rate, that’s what you get by instituting a draft and sending people off to war, but it’s really hard to believe that the lives of people back home were better during the war years.
November 16th, 2008 at 11:13 pm
How does spending 40% of a nation’s wealth on unconsumable goods possibly make people better off?
We weren’t spending 40% of our wealth, we were spending 40% of our yearly output — of a rapidly expanding yearly output, I should say. Actual standards of living as measured by consumption of goods and services probably didn’t increase by very much for a large percentage of the population (given higher taxes and rationing). But the accumulated savings were plowed into better living after the fighting was over. And critically, the psychology of depression was finally killed by the war.
but it’s really hard to believe that the lives of people back home were better during the war years.
It is? IIRC the unemployment rate was still well over ten percent on 12.06.41. Within a relatively short time the unemployment rate was approaching zero. And millions of people who were working before Pearl Harbor nonetheless saw fat increases in their paychecks during the war years. Upper middle class and wealthy people may not have been better off during the war — their ability to consume goods and services was constrained, after all — but folks falling below these strata — and that surely means the majority — were certainly wealthier on average in during the war years than they were in 1940 (even if they had to wait a while to spend some of the saved wages they had accumulated).
November 16th, 2008 at 11:22 pm
No, this is why it is important to have experts on Sunday talk shows, rather than columnists and newscasters who don’t know what they’re talking about.
For those of you wondering who the heck Peter Schiff is:
According to wikipedia, Peter Schiff is a big Ron Paul economic adviser. His father was tax protester Irwin Schiff.
Here’s a funny article from May 2008.
http://www.usnews.com/articles/business/your-money/2008/05/30/permabear-peter-schiffs-worst-case-scenario.html
Schiff said there would be $200/ bbl oil in 2002. He will eventually be correct, but it has happened yet and oil has now dropped below $100. He’s a gold bug, and was purchasing all kinds of stocks in May of this year, especially Asian shares.
Asian share have fallen more than US shares this year.
He didn’t think that commodities were overvalued in May(commodity prices have fallen), yet he also said that we would have falling US stocks (though, again, he liked foreign stocks) a plunging dollar (the dollar has strengthened) and civil unrest (hasn’t happened).
In fact, what will happen to the US will be worse than the Great Depression. OMG!!!
Ok, so he was wrong. My problem is that his forecast was incoherent. If the US was going to circle the drain, I find it hard to imagine that things would be hunky dory abroad.
Peter Schiff is a scare-monger. Sometimes he is correct, but only in the sense that a broken clock is accurate twice a day.
November 16th, 2008 at 11:35 pm
The full 60 minutes President-elect Obama interview
November 16th, 2008 at 11:40 pm
I think you are being needlessly hard on Schiff. He comes at things with an ideological set of tools that don’t work on everything, but if you compare him to the rest of Fox he’s the one-eyed man among the blind.
He was on panels where while he was the gold bug, Ben Stein was buying Lehman Brothers and telling everyone that the financials were diamonds at garage sales. He wasn’t just a stopped clock crying doom either, he knew exactly why the rest of the people clapping for tinkerbell were full of bullshit.
November 16th, 2008 at 11:47 pm
But the accumulated savings were plowed into better living after the fighting was over. And critically, the psychology of depression was finally killed by the war.
Both these propositions are quite believable. But it’s not so obvious that either wouldn’t have occurred without a war, just from the natural restoration to a normal economy.
It is? IIRC the unemployment rate was still well over ten percent on 12.06.41.
Employing people to kill foreigners in faraway lands isn’t productive. It may be the case that it is better for those particular families, but that comes at the expense of everyone else who has to support them in their unproductive activities.
folks falling below these strata — and that surely means the majority — were certainly wealthier on average in during the war years than they were in 1940 (even if they had to wait a while to spend some of the saved wages they had accumulated).
Wealthier in what way? Consumption + Savings = Production. If you cut consumable production by 40% you have to cut either consumption or savings or both–and since capital is used up for producing war, post-war consumption should drop too. I suppose it’s possible that the war stimulated an absolute increase in production that wouldn’t have occurred otherwise, it’s just really hard to believe that could have overcome the massive waste inherent to war.
November 17th, 2008 at 12:21 am
Its official name is The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. It’s a type of Nobel prize — with a different history and pedigree than the other five.
C’mon, that’s just absurd.
I could endow a foundation to create the “Chet Prize in Burping in Memory of Alfred Nobel”, but that would hardly create a Nobel Prize in Burping, now would it?
It’s not a “type of Nobel Prize.” It doesn’t have anything to do with the Nobel Foundation or the goals of Alfred Nobel; calling it a Nobel Prize is, at best, an attempt by Swedish banks to ennoble (if you will) the non-science of economics by connecting it to Nobel’s legacy and name.
November 17th, 2008 at 12:28 am
Chet, that was a joke. You don’t know what you are talking about. Don’t make me feel sorry for you.
November 17th, 2008 at 12:30 am
If you, Chet, could make it prestigious enough that people would care who won your prize, then yes it would be a “Nobel” prize. But you can’t. You attempt to take the issue to absurdity renders nothing but your opinion absurd, and reminds everyone that Glaivester is a silly crank.
November 17th, 2008 at 2:04 am
Though I am a big fan of George Will, having him face Krugman on economic policy and history makes about as much sense has having him (George Will) play pickup basketball against LeBron James.
November 17th, 2008 at 2:19 am
There is no typo in the headline, but it does read that there is a new interesting columnest or blogger named “Will V. Krugman” who just came out with something to say on the Depression.
November 17th, 2008 at 5:42 am
You are pretty good on those BloggingHeads things. How come you aren’t on TeeVee more? You should try to get booked on programs outside of politics, like MTV or Ellen or Talk Soup. Appearing on the politics shows and reaching “influentials” is yesterday’s news. The tipping point for good policy and good politics is reached when you convince independents and the disaffected and the disaffected don’t watch This Week with George Stephanopolis. You make good analogies and have good policy shorthand. I think if you had more fun writing and were a touch less snarky you could really appeal to a wide audience. You wouldn’t get to sit on panels with Michael O’Hanlon but I think that means of pushing an agenda is coming to a close.
November 17th, 2008 at 6:36 am
Re: Employing people to kill foreigners in faraway lands isn’t productive.
So what? THY’RE NOT UNEMPLOYED. That’s what matters.
Re: It may be the case that it is better for those particular families, but that comes at the expense of everyone else who has to support them in their unproductive activities.
You wiuld suggest that allowing the Nazis and the Japanese rto win the war by default wold have been preferrable because it was more productive? Wow, I’ve heard some crackpot notions before but that one makes Pat Buchanan look like a sage.
November 17th, 2008 at 7:17 am
Except that the Nobel prize committee now officially recognizes the Sveriges Riksbank Prize prize, and even lists it on their website. If you can get them to do the same with the Chet Prize, then I will gladly recognize it as a Nobel Prize.
This nitpicking over the Nobel prize is a matter of who donated the money, not official recognition by the prize board. When the prestigious Westinghouse awards (the premier science aware for high school research) were renamed for the new funder Intel, they still retained the same prestige.
November 17th, 2008 at 8:15 am
Re: Employing people to kill foreigners in faraway lands isn’t productive..
So what? THY’RE NOT UNEMPLOYED. That’s what matters.
Okay, that’s the problem with Keynesianism. You think that employment is all that matters. Whetehr they actually produce anything useful doesn’t.
You would suggest that allowing the Nazis and the Japanese to win the war by default wold have been preferrable because it was more productive?
No, the point was that having to fight the Nazis and Japanese was an economic drain. It’s not that it wasn’t necessary, but that if we hadn’t been in a position where they had to be fought (e.g. if the Nazis and the militarists who ran Japan had been defeated by cooler heads) that it would have been more productive.
What got us out of the Depression during the war was not the spending for the war, it was the intense saving that went on to support the war (rationing, war bonds, etc.)
November 17th, 2008 at 8:24 am
Will is something of a trustfund scumbag so of course he doesn’t know anything about economics or apparently history.
Only dandies with no financial concerns study philosophy. Will’s less than rigorous academic course did allow him time to obsess over his favorite team and daydream on how to make the Metroliner faster, however. That clip should serve as a reminder of the dangers inherent in relying on ill informed trustfunders and economic royalists to advocate for your cause.
November 17th, 2008 at 8:48 am
ALVY
I mean, d- He can give you- Do you hafta
give it so loud? I mean, aren’t you ashamed
to pontificate like that? And-and the funny
part of it is, M-Marshall McLuhan, you don’t
know anything about Marshall McLuhan’s…work!
MAN IN LINE
(Overlapping)
Wait a minute! Really? Really? I happen to
teach a class at Columbia called “TV Media
and Culture”! So I think that my insights
into Mr. McLuhan-well, have a great deal of
validity.
ALVY
Oh, do yuh?
MAN IN LINE
Yes.
ALVY
Well, that’s funny, because I happen to
have Mr. McLuhan right here. So … so,
here, just let me-I mean, all right. Come
over here … a second.
Alvy gestures to the camera which follows him and the man in line to the back
of the crowded lobby. He moves over to a large stand-up movie poster and
pulls Marshall McLuban from behind the poster.
MAN IN LINE
Oh.
ALVY
(To McLuban)
Tell him.
MCLUHAN
(To the man in line)
I hear-I heard what you were saying.
You-you know nothing of my work. You
mean my whole fallacy is wrong. How you
ever got to teach a course in anything is
totally amazing.
ALVY
(To the camera)
Boy, if life were only like this!
November 17th, 2008 at 8:51 am
A lot of the infrastructure created to deal with WWII did in fact go on to civilian and post-war purposes, and not just roads and bridges and factories, but new institutions and a newly trained technical class. That wasn’t an accident, nor something associated with all wars.
For example, to shift the population of military bases from one easily attacked area in the Northeast to be spread around the country, and particularly to the politically over-represented American South, a lot of basic infrastructure had to be created or refined in the process.
But the South was an area of extreme under-development; taking from a backwater, disease-ridden, worker-starving hell-hole to basic modernity can only be done once. Returns become limited.
And why anyone would deeply admire George Will is beyond me.
November 17th, 2008 at 9:32 am
You are correct in that creating total employment in the realm of building tanks and shipping soldiers overseas was not productive. It was terribly expensive, and after the war a big recession was predicted. It was considered a miracle at the time that the US economy quickly rolled into consumerism. Several things happened:
The US was now the dominant manufacturer, exporting basically everything overseas from automobiles to tractors to basic foodstuff.
3 years of pent up consumer demand caused a boom in luxury items prohibited during the war years, such as cars.
If I recall correctly, the debt to GDP ratio in the US has never been as high as it was at the end of WW2.
November 17th, 2008 at 10:23 am
Okay, that’s the problem with Keynesianism. You think that employment is all that matters. Whetehr they actually produce anything useful doesn’t.
Now, that’s not true. Of COURSE Keynsians care about productivity – they just don’t think it’s the be-all and end-all.
It would have been nice if all of the work for the war effort had gone into projects that would have also boosted GDP longterm – and much of it did – but it is also significant that large chunks of the populace that would have otherwise been unemployed were able to support themselves.
You know, a big body of destitute underclass doesn’t exactly lay the groundwork for long-term growth, either.
November 17th, 2008 at 12:46 pm
DTM: I wasn’t advocating for WWII as a stimulus plan; simply pointing out that in those particular conditions, especially given the underdevelopment of much of the U.S., it was possible for a portion of that war spending to be more easily integrated into a post-war economy than might be expected from subsequent wars.
I.e., nobody proposed rebuilding our roads & bridges as a necessary aspect of the invasion & occupation of Iraq.
November 17th, 2008 at 1:12 pm
One is an intellectual. The other poses as an intellectual.
One is a a Nobel laureate.
November 17th, 2008 at 3:43 pm
MATTHEW: FIX THE CLIP! YOU HAVE THE WRONG CLIP!
What’s the point of commenting when it’s obvious Yglesias never reads the comments?
November 17th, 2008 at 4:27 pm
You don’t know what you are talking about.
Look, this is all public knowledge. Everyone knows that Nobel didn’t establish the prize in economics. A Swedish bank awards the prize.
Tell me what “Nobel Prize” means if it doesn’t mean “one of the prizes for achievement in the fields of arts and sciences originally laid out by Alfred Nobel’s will.” I mean who gets to be the arbiter of what fields are worthy of such a prize if not Nobel himself?
If you, Chet, could make it prestigious enough that people would care who won your prize, then yes it would be a “Nobel” prize.
No, at that point it would be the Chet Prize. The problem here is that the Swedish bank that hands out the award is not sufficiently prestigious enough on their own, so they appropriated the name of Alfred Nobel to ennoble their unconnected prize.
Which strikes me as dishonest. Look, economics certainly existed when Nobel envisioned his prize. Why would he omit it if it was not intentional? (What, he forgot?) And if Nobel’s intent was not to recognize achievements in economics, why should his legacy be used to do so, now?
I don’t even see why economics gets a prize. The saving grace of the so-called Nobel Prize in Economics is that it’s mostly given out to sociologists. You know, real scientists.
November 17th, 2008 at 6:01 pm
The body language in these clips is priceless. In the first clip (that Matt didn’t post), Krugman explains just how wrong Will was and Will sits there tapping on the table, looking quite annoyed that someone who actually knows what they’re talking about gets to be on TV for a change. In the green room clip, Will continues to pontificate and Krugman stands there glancing around from wall to wall to ceiling to floor, looking quite uncomfortable that he has to stand next to such a buffoon.
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