Council on Foreign Relations Crashed-and-Burned Watch CXIII (Great Depression Revisionism Department)
The Council on Foreign Relations last Monday held a New Deal Conference--an event that, as one senior Bush I economic policy advisor and rock-ribbed Republican snarked, was the Council on Foreign Relations' attempt to outbid Heritage as the most biased thinktank.
Here is Edward Prescott. It is truly remarkable:
The 1920s: Bubble, Growth, or Gold? - Council on Foreign Relations: EDWARD C. PRESCOTT: The period of the '20s was one of healthy growth, until Hoover's anti-market, anti-globalization, anti-immigration, pro-cartelization policies were instituted, brought this expansion to an end, and created a great depression. Roosevelt's policies prolonged the Depression for over six additional years.... Ellen McGrattan and I looked at the -- using some theory and saying, what should the value of the stock market be? You look at the value of the productive assets, and this includes intangible capital, brand names, patents, know-how of corporations, as well as the explicit machines and factories and equipment.... We found that it's correctly evaluated. By the way, the stock market is volatile as can be. But there's a strong regression to fundamentals....
[T]he economy only recovered and it started recovering in 1939, when there's a major shift in policies. That was the year when Roosevelt said the New Deal is dead. That was the year he called up the businessmen who had fled to England because -- and said please come back; we got to get ready for war. It was not expenditures. Government defense expenditures and net exports did not jump until 1941. ... A lot of people don't know the current administration has abandoned the use of cost-benefit analysis by rescinding the 1981 executive order requiring all regulations to be evaluated before being implemented...
It is hard to know what to say. The fall in unemployment from 23% in 1932 to 11% in 1939 is not "recovery" because the economy only "started recovering in 1939"? The post-1939 recovery--as unemployment falls from 11% in 1939 to 9.5% in 1940 to 6% in 1941 to 1.2% in 1944--is "not expenditures... expenditures... did not jump until 1941"? The claim "the current administration has abandoned the use of cost-benefit analysis" would astonish Cass Sunstein and Jeff Liebman, who are doing just it in OMB right now. And who were those "businessmen who had fled to England" and stayed there until 1939 in the aftermath of Roosevelt's election? Can Prescott name a single one? No.
This is not economics. This is fantasy pure and simple.