Libertarians Looking Vaguely in the Direction of Apostasy
by Mike Kimel
Libertarians Looking Vaguely in the Direction of Apostasy
Tyler Cowen is a prominent libertarian, a professor at GMU and Director of the Mercatus Institute. He is also on very, very dangerous ground. Lately he has had a couple of posts – the latest one here – that quote a new book by Alexander Fields. I haven’t read the book yet, but it seems to describe the 1930s as a period of great innovation despite pervasive misery.
But some of the passages Tyler quotes come tantalizingly close to noting that the economy was actually growing very rapidly by 1939. But what happens if he realizes it isn’t just after 1939, that real growth under FDR was faster than under any President since data has been collected – even if you leave out 1941 through 1945. See Figure 1 at this post. (Or that FDR was followed by LBJ, and then JFK, and then Clinton.) What if he takes a look at private investment during the New Deal era. What if he looks at the relationship between tax rates and economic downturns or comparison of growth rates between the “roaring 20s” favored by libertarian myth and the New Deal era?
Could a person really remain a libertarian if they realized things like that? Cowen has a lot at stake. I wonder if he’ll take the next step.
Note… Arnold Kling is also skating on the same ground. As of this writing, his readers, usually good for at least a few comments on every post, are stunned into silence.
Cross-posted at the Presimetrics blog.
Nature abhors a vacuum and I abhore an empty comment thread. I commented over at Kling’s blog. My comment was that this Field guy underestimates the benefits of high public spending. My points if any is that I couldn’t comment without the computer (WWII and soon after military contracts) and the modified DARPA net.
Mike, I find this statement troublingly condescending: “… it seems to describe the 1930s as a period of great innovation despite pervasive misery.” During times of high unemployment, especially those times before implementation of the GREAT SAFETY NET, workers had to be innovative to make a living. Remember the pictures of the apple/pencil sidewalk sales? It’s not so different today, but explains the basis for the underground, cash economy.
CoRev,
Been out to LA lately? Plenty of people selling fruit on the street.
What is new these days is seeing panhandlers on the streets in smaller Midwestern cities. The other day I noted one on each corner of an intersection in Akron, OH. (Cleveland Massilon and Market.) I would say people are scrambling now.
Ah… cactus is Mike Kimel. I still haven’t changed my Google profile.
Cowen is another libertarian who draws a pay check from……the government.
Mike aka cactus,
The reason FDR had such great growth was to fill up the ‘bucket’ of huge negative growth proceeding it. He had no where to go but up.
See chart of US growth- huge downturn folowed by huge upturn then back to ‘normal’:
Islam will change
My favorite libertarians are the ones working for DoD contracts.
How long will it take for current doldrums to return to trends?
Ah, CoRev sees subsistence-level roadside commerce, just like was done when roads were an innovation, as innovation. That explains a lot.
“Libertarian” is one of the last political words to become emptied of meaning. We’re already accustomed to ‘liberal’ who are so, so distant from someone like FDR or Kennedy, and ‘conservatives’ that are really radical. Lately we have ‘libertarians’ that favor large military spending in the absence of a massive enemy. Soon this word too will fall into a meaningless political football.
Oh well.
How very, very honest of buffy. Yes, there was lots of spare capacity. There was also a lot of public sector spending aimed at putting the spare capacity to use. buffy concludes, on no evidence, that between the two factors, spare capacity is the reason for the growth. There is a reasonable argument to be made, one which John Maynard made, that spare capacity can go unused for a long time absent some new source of demand to make use of the capacity. That’s government’s role in a liquidity trap.
Buff,
Ok. We keep coming back to the same place. FDR isn’t the only special case you have to explain away. There is also LBJ, JFK and Clinton. And there is the whole slew of tax and growth results that don’t have presidents’ names attached. Remember I have done this at the state level too. FDR is only one small piece of the evidence. It just happens to be the spot that Tyler Cowen happens to belooking at.
Kharris,
My point was that once we ‘filled the bucket’ we immediately fell back to the normal growth line. All that government spending an expansion just got us back to where we started. That was not an insignificant accomplishment. Period. And maybe that’s what’s needed to get us back on track now. Then again maybe we need another WWII that destroyed all the other industrial nations, cuased a huge growth in gov spending and put all the unemployed under arms or building war material….
My complaint is somehow corresponding the world economy of the 1930s with today. They are not even close. My other complaint was the claim that all that government expansion had any lasting effect – it didn’t.
My main complaint is with the huge increase in the breadth and depth of the central governments reach into all our lives. The Feds don’t need that kind of power war or no war in the economic lives of everyone. How many posts here at AB do we need to suffer through that are just versions of ‘soak the people who want to be rich’? (vs. actually soaking people who ARE rich). The continued attacks on individual libeties has not abated and the Dems continued assault on the first and second amendments continues unabated.
Sorry to everyone for feeding the troll…
Islam will change
“…and ‘conservatives’ that are really radical.”
Now, now let’s not give conservatives more credit than is their due. Correction: and ‘conservatives’ that are really reactionary. A radical looks to change an existing order of things. The radical has to form new ideas that will hopefully appeal to the masses and thereby effect a change to something better, though sometimes simply something else. A reactionary, as the term implies, is reacting against change, preferring the status quo. He has to convince the masses that things are as they should be in spite of their apparent dissatisfaction, which the reactionary attempts to portray as brought about by any effort at radical change.
This post is not up to your usual standards. It doesn’t well understand Cowen and Kling very well or libertarianism for that matter. There is also a lot of economic history of the 1930s that explains the growth by factors other than FDR’s policies. It overlooks the poin buffpilot makes that if you give someone a base of small numbers and a long time to measure, it’s a lot easier to show growth. It also makes the error, imo, of implying that the policies of the 1930s would work in today’s environment when many of the most important conditions – strong national balance sheet, trade balance, demographics, oil resources; minimal foreign competition; greater mix of unskilled and semi skilled tasks in demand; negligible land use regulation, negligible government contracting regulation, lower workforce regulation; no Meidcare or Medicaid — have reversed themselves.
Yes things will turn up quickly once we get everybody back to making a few dollars a day!
I’m only sorry he’s feeding you.
Mark,
The point of the post is that Cowen is now wailing to state that the economy was growing very rapidly as early as 1939. Its a crack in the armor. One day he might go so far as to notice that the economy grew rapidly from 1933 to 1940. Then his whole philosophy has to collapse.
Catch-up growth
Two points:
1. National Income accounting didn’t really exist before 1928/1929, so I don’t know how you can compare two different data sets.
2. Cowen’s whole point is that rapid technological change was occurring independent of macro policy. The same thing happened in the 1990s, but we had good macro policy.
mark,
The point of this post is that Tyler is admitting that the economy was growing rapidly by 1939. Now, if he looks at the data, he’ll find that growth was rapid starting in 1933 (save for the savage ’37-’38 recession). None of that fits the way he understands the world.
Now… you can say catch-up, etc., but then you have to explain away a lot of other things that appear in this post. Once you start looking at data the whole libertarian paradigm falls apart.
buff & Nick Bradley,
Sure there’s catch-up growth. You can explain away FDR, but then you also have the special cases of JFK, LBJ and Clinton. Or you can look directly at taxation and growth rates. At the state level or the Federal level. Doesn’t matter. At some point you find tha the special cases that have to be explained away are the vast majority of the data points no matter what data you look at. This is the slippery slope Cowen has stumbled onto.
Now, his audience is used to a smorgasbord of posts, but Kling’s audience is more the on-message type. Hence the silence from that end.
Nick,
Please click the link in the post (this one: http://www.angrybearblog.com/2010/04/1920s-depression-glenn-beck-thomas_19.html).
You’ll find in that post me writing that I never go back before 1929 because I don’t trust the data but that I’d make an exception in that one case. The reason – Thomas Woods (and a number of others from the tax cutting crowd) argues the 1920s produced very rapid growth, especially when compared to the Great Depression. Such folks usually use the same data set (GNP from the Historical Statistics of the United States) to make their point. I noted that when you take the same series and compare the New Deal (tax hikes, gov’t spending) era to the Roaring ’20s (huge tax cuts, laissez faire), the New Deal comes out looking much better than the Roaring 20s. Don’t blame me for stating: “the data set y’all like to use is very bad, but even playing it your way it doesn’t say what you think it says… and by the way, there are a whole lot of other reasons to doubt what you’re saying.”
CoRev,
Not sure if you’ve been to Los Angeles lately, but there are plenty of people trying to sell fruit on sidewalks. But that isn’t new… what is new is seeing panhandlers in small midwestern cities. We’ve gone from none to quite a few in a very short period of time.
Last Saturday I saw four panhandlers at the same intersection – each at a different corner – in Akron, Ohio. (Corner of Cleveland – Masillon & Market Street for anyone familiar with the area.) There are an awful lot of people desperate enough to beg these days.
I agree! The mother of invention does not coddle her young.
Laissez faire leadership what ever it’s merits simply was not an option in the 1930’s. People were desperate and scared. Even if FDR was just a phoney front man, he was good at giving Americans hope, and that’s half the battle.
Compare the US economy, with the worlds other major economies: Great Britain, Germany, France, Italy, the USSR and Japan. By this metric FDR was not that good. Slow out of the blocks – Drafted his betters.
To bad Huey Long never got his chance.
For what it’s worth, I considered myself “mostly libertarian” for about 20 years, until roughly the time of the tea party 2009 anti-health care pre-fascist brownshirt emulation, at which point I saw the word had become re-defined to mean something in the popular sense a lot closer to what was once ‘conservative reactionary.’
And I never had even a few minutes of time when I didn’t realize that stimulus works (or in the Krugman language that Keynes is correct). It was just obvious, since, well….since before I heard of Keynes or “stimulus”. To me, obvious like 23+41=64. Just mathematically obvious. After a bubble like ours, you have a great depression, unless you stimulate in a big way. That was never ideological. It was only mathematical. Obviously ‘libertarian’ meant something rather different in my mind than it means now. For me, it was stuff like maximum ultility, degree of information, tradegy of the commons. Sensible stuff. Not crazy ideology.
So, the putative libertarians that are now starting to catch up on the mathematically obvious, well, sure. that’s likely. ‘Libertarian’ doesn’t necessarily imply they could never understand something basic. It only seems that way since 2009.
cursed,
International growth data from the period is hard to come by. Remember – the US barely started keeping GDP figures in 1929. Few countries were giving that much thought in the era, what with the Depression, etc.
That said, I do remember seeing a study (can’t find it right now – its been a long time) comparing things like unemployment and a few other metrics that were kept across a few developed countries. As I recall, the countries where the government acted forcefully recovered much quicker than the countries which went laissez faire. But then my guess is most Marginal Revolution readers would understand that. I think most Econ Log or Mises Blog or Cato Unbound readers would not.
Mike, thanks for making my point. Need is the father of some innovation.
Trolling, like many things, is in the eye of the beholder. If the beholder is also a narrow partisan, like buffy, then “troll” is just a way of trying to discredit views that are dangerous to the partisan.
Buffy claims he had a point to make other than the one he made. I am not generally able to respond to points that people claim they intended to make. I can only respond to the things they actually say or write. That’s what I did. What buffy wrote was that growth under FDR was due to the large output gap…period. That almost certaintly untrue. Now that buffy is back to say what he claims he actually meant to say the first time, it includes the assertion that FDR’s expansionary policies had no long-term effect. That would very likely have proven to be untrue, had we not drawn a bit line through the GDP trend by entering WWII. As it is, there is simply no basis for buffy’s claim.
There is a logic to buffy’s claim, but it is a logic that depends entirely on buffy declaring what is significant, what is a lasting effect, and on and on. buffy needs that advantage, because his argument cannot stand up without that help. Why is returning to a pre-depression level of output not significant? I’m pretty sure is was significant to all the people who had jobs and income who otherwise would not have had them. What is a lasting effect? Well, whatever it needs to be for buffy’s claim to be true.
Buffy started with a dishonest statement. I called him on it, and he defended it with more dishonest statements, and a bit of argumentative trickery. That is not new for buffy. Now, I will admit the possibility that he is so steeped in some of the Amity Shlaes view of economics that he doesn’t even realize he’s spouting nonsense, but he is is spouting nonsense. With a strong desire to substitute death and destruction in the place of education and public works as a recession remedy for a cherry on top.
KH, in your case trolling is attacking the person with little to no issue raised on the other’s point(s). Something youdo consistently. You really do need to get a better life than the one you lead as the personal attack troll.
Isn’t it enough to note that, during a time of extreme global economic distress, plus political turmoil, plus a climatological disaster, that the U.S. held together under FDR? I enjoy the trading of statistics, but it’s unnecessary. After all, what is the libertarian counterfactual? There would have been full employment, of course. All the women would be beautiful and all the children above average. And rocket ships, my god, the rocket ships! And the country would be crisscrossed by great ribbons of Reardon steel, or something…
Really, it’s just so silly.
Mike,
I actually familier with the area and those corners should be fairly good place. I wonder where they go at night to keep warm since its still fairly cool at nights. Shelters?
Down here in the land of warmth we have not seen an increase in panhandling. But then again you can still get unskilled jobs easily here. None of my sons cohort, (HS seniors), has had any problems getting part-time jobs. And even stringing a few part-time jobs together is got to be better than the street-corner. (safer if nothing else).
Islam will change
Oh sure, reactionary. I don’t mind using the old words. But today, they are quite radical. No, really. They want to create huge change. See, forget what ‘libertarian’ meant 5 years go. It now means god knows what, but mostly it means Rand Paul if you pay attention, and if you are more average it means tea party radicals and they want something a lot closer to some kind of ideal (to them) that looks like something that has never been around since civilization got going, if you ask me. I think it’s a real desire, on the part of many, for a full-blown depression, because it *feels better* to them to imagine people humbly begging at their door for crumbs, and being grateful when they offer a piece of bread, so that they would feel truly superior, etc. Nasty stuff, and ideal of a sort.
Mike,
The depression/WWII growth IS the unique event. And I think FDR did a good job of getting us through them both. But we haven’t come close to getting to those type events since then. Not the ’73 oil crunch or today. Nothing comes close. The rest is just a random walk around a straight line. (I assume you’ve dispensed with the idea theat the President controls US GDP growth).
Yes we feel the pinch today but its nothing compared to the state of the US in 1934.
I agree we need to raise taxes and I have said repeatedly here that the second Bush tax cuts (after 9/11) were just plain stupid. But right now they are Obama’s tax cuts. He just signed them into law with huge support from the Democrats (and Rs who could do basically nothing in any case). So you can pine away about the current unsustainable fiscal chaos (I do!) but Obama has no plans to change anything soon.
And lastly you keep comparing apples to space shuttles. The US and world economies, social political organization, critical resource distribution are all radically different than under FDR than they are today. And FDR started from a very low bottom. Like I said, only one way to go – up (well we could have slipped into Communism and headed further down, but FDR was never going that way anyway).
And are you still going with the Clinton casued the US to enter the information age, eliminated the Soviet Union giving us the peace dividend, and managed to get out right before the tech bubble (that evil Bush for popping it!) and thus we had it so good meme?
Tell me once again – was the Clinton tax policies optimum? If he had increase by 10% more would we have grown at LBJ rates? 20% at 7%/year? 50% maybe at 15% per year? What does the science of economics tell us in perfect huiindsight what the right number was?
And again when do I see the 5% GDP growth rates and 5% unemployment under Obama? Those guys on the street corner could use it.
Islam will change
CoRev,
It also makes my point. The economy is pretty bad because of the policies that have been followed thus far. I’ve had several posts showing how the Obama admin’s policies on economic issues have been indistinguishable from those of his predecessor.
Buff,
I talked to a couple of the panhandlers. They said they had been employed at odd jobs, but the jobs dried up, and they (still) have homes to go back to at night with families that depend on their income from panhandling. I can’t tell you its true based on a short conversation, but I wasn’t thinking meth-addict or alcoholic when talking to them.
Construction was pretty big in NE Ohio until about late 2008. There are a number of sites with homes or condos that have been half built since that time.
Ah… Buff, a clarification… neither of the panhandlers I talked to were at the corner of Cleveland-Mass & Market.
I’ve written about this before in many places so excuse me if you’ve seen this.
Tyler Cowen refers to TFP (total factor productivity, or the residual from in growth after accounting for physical capital and labor accumulation) when making his argument for the Great Stagnation.
A good source of information on TFP growth is a few of papers by Alexander J. Field: “US economic growth in the gilded age”, “The Most Technologically Progressive Decade of the Century” and “The origins of US total factor productivity growth in the golden age”.
Average annual TFP growth is as follows:
1835-1855-0%
1855-1869/1878-(-0.5%)
1869/1878-1892-2.0%
1892-1919-1.1%
1919-1929-2.0%
1929-1941-2.8%
1941-1948-0.5%
1948-1973-1.9%
1973-1995-0.5%
1995-2005-1.5%
The first thing that should grab your attention is that TFP growth was at its most rapid during the Great Depression. The second thing you should observe is that TFP growth was at 1.9% or higher from the 1870s through 1973 with the exception of 1892-1919 and 1941-1948. TFP growth has picked up since 1995 (but has slowed since 2005). So this pretty much supports Tyler Cowen’s conjecture concerning the Great Stagnation.
Now, why was TFP growth faster during the periods mentioned? Well, Field analyzes the growth by sector and sector size and comes to some interesting conclusions. TFP growth was fast from the 1870s through 1892 because of railroads (which peaked in track mileage in 1916) and to a much lesser extent because of the telegraph. Almost all growth in TFP in the 1920s can be accounted for by manufacturing and that probably fed that decade’s stock market boom. Why did manufacturing TFP explode in the 1920s? According to Field it was due to the widespread electrification of factories (which had started in the 1880s). In the 1930s manufacturing TFP, although still relatively fast, slowed down. (He also points out that private R&D quintipled from 1929-1941.) But transportation TFP soared from 1929-1941 mainly due to the five fold increase in the share of tons-miles hauled by interstate trucking and its interaction with railroad transportation. (The US built its first interstate highway system in the 1930s.) And he argues that transportation TFP was largely responsible for the growth seen from 1948-1973, as manufacturing TFP actually went negative for part of that period. (And recall the Interstate Highway System, built on top of or paralleling the US Route system of the 1930s was largely completed from 1956-1973.) TFP growth was negative from 1855 to the 1870s primarily because of the Civil War.
Recent work by Bart van Ark shows that TFP in the distribution sector was the main source of the surge in growth from 1995-2005, and he argues that was due to the widespread adoption of ICT technology by that sector. (Think big box Walmarts.)
What’s interesting is that Field’ demonstrates that Federal government money played a major role in all of those developments with the exception of factory electrification (urban areas were largely electrified with private money), even, and perhaps especially, the internet.
What’s also interesting is that Tyler Cowen is now promoting Field’s’ book, and yet he scarcely mentions Field’s explanation for why TFP growth is high when it is, and consequently acknowledging that the absence of well targeted Federal investment might be a culprit in the Great Stagnation.