'The "Experts" Told Them So'
Paul Krugman sets the record straight. Again:
Amity Shlaes strikes again, by Paul Krugman: When you hear claims that the New Deal made the depression worse, they often come directly or indirectly from the work of Amity Shlaes, whose misleading statistics have been widely disseminated on the right.
Now, Ms. Shlaes has found a new target: John Maynard Keynes. There’s a lot to critique in this piece, but this one takes the cake:
But the most telling fact about the new rush to spend is that its advocates have insisted on invoking the New Deal. They tend to gloss over the period when the phrase, “We are all Keynesians now,” was actually first uttered: the mid-1960s. (Uttered by Friedman, in fact, though he meant only that we all work in the terms of the Keynesian lexicon.)
The Great Society of that period was the ultimate Keynesian experiment, and it didn’t work very well.
Grr. Keynesianism says that deficit spending can help create jobs when the economy is depressed. The Great Society wasn’t deficit spending, it wasn’t intended to create jobs, and the economy of the 1960s wasn’t depressed. It was social engineering; we can talk about how well or badly it worked, but it had nothing whatsoever to do with Keynesian economics.
Now, LBJ did engage in some Keynesian economics: namely, he imposed a contractionary fiscal policy in the form of a tax surcharge in an effort to cool an overheating economy.
Alas, pretty soon we’ll have all the usual suspects saying that the Great Society proves that Keynesian economics doesn’t work — after all, the “experts” told them so.
Posted by Mark Thoma on Wednesday, November 19, 2008 at 02:34 PM in Economics, Fiscal Policy |
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