No New New Deal

by Don Boudreaux on November 30, 2008

in Great Depression, History, Myths and Fallacies

Here’s George Will, in today’s Washington Post, speaking great good sense about the alleged need for a new New Deal.  (Will quotes Russ, and mentions Amity Shlaes’s important book The Forgotten Man; unfortunately, although he hints at Bob Higgs’s work, he doesn’t mention Bob by name or Bob’s great book Depression, War, and Cold War.)

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Unbathed November 30, 2008 at 3:34 pm

George Will writes:

[Obama and Goolsbee's] theory is that the crisis is largely psychological, requiring shock treatment.

He provides no citation for this claim. A Wikipedia editor would mark this with the Original Research tag, not promote it to the front page.

Crusader November 30, 2008 at 3:46 pm

We're getting the new "New Deal" whether we like it or not. Get ready, grab your ankles.

Mathieu Bédard November 30, 2008 at 3:55 pm


He is referring to Keynesian theories, which rely on psychological clichés to explain economic cycles.

Unbathed November 30, 2008 at 4:05 pm

Crusader wrote:

We're getting the new "New Deal" whether we like it or not.

I think you are mistaken, Crusader, and I would like to profit from your error. Please create a prediction market so I can short your thesis.

Unbathed November 30, 2008 at 5:33 pm

A search on (Obama ("largely psychological")) shows that the authority for George Will's suspect claim is George Will himself. Perhaps Will has confused Obama with Phil Gramm and John McCain, who famously said during the campaign that the problem was mental.

Unbathed November 30, 2008 at 5:40 pm

Mathieu Bédard wrote:

He is referring to Keynesian theories …

Will should write Keynes when referring to the theories of Keynes and some other name when referring to the theories of some other person. He should not, without evidence, ascribe to Obama and Goolsbee theories which they do not hold and against which Obama campaigned.

Mike Farmer November 30, 2008 at 6:26 pm

Psychological or not, the idea that a major shock is needed indicates major government engineering that's likely to have unintended consequences which will worsen the situation. I doubt the "shock" will be to deeply cut taxes, end corporate welfare, announce long term stability by limiting government interference and do away with all restrictive regulations which harm small to medium size businesses.

Mathieu Bédard November 30, 2008 at 6:43 pm

Here is not the best medium to explain such doctrines, but it's implicit to his recently announced stimulus plan.

muirgeo November 30, 2008 at 9:11 pm

So if the stock market goes up by the same amount for Obamaºs 8 years as it did for FDRºs it will be about 23,000 at the end of his term. AWEFUL!!!! Funny what passes for a legitimate libertarian arguement these days. Talk about deflation.

Ray G November 30, 2008 at 9:25 pm

Hats off to Ms. Schlaes; she's getting some good mileage from a book that's not exactly a new release anymore.

Of course she couldn't have foreseen the timing of it all, but the release of her book is working out well. New enough to be specifically relevant to our current situation, but not so new that it can be confused with being "me-too-ism."

Already a reader of Schlaes, I read "The Forgotten Man" when it was new, and recommended to quite a few people.

The only drawback to many of the sensible articles I've seen lately on this same topic is that only the choir and the heathen are listening. The choir already knows, and the heathen don't care.

Everybody else – the general public that is – still think that the Republicans are the majority party in Congress, and that the housing bubble was caused by deregulation.

MnM November 30, 2008 at 9:26 pm

Hmmm. I don't mean to point out the obvious here, but taking an a posteriori event and treating as a priori to inform your argument is one hell of a logical error.

Ray G November 30, 2008 at 9:40 pm

Referencing logic though, wouldn't it make more sense to speak of deductive and inductive?

MnM November 30, 2008 at 9:46 pm

Ray, possibly but not necessarily. A priori and a posteriori are forms of knowledge afterall. Reversing the two would be a logical error in my book.

*shrugs* To each his own I suppose. The criticism is equally valid in either case.

Ray G November 30, 2008 at 9:50 pm

It would be petty for me to point it out in other circumstances, but since we're all playing nicely I thought I'd just throw that out there.

After all, pick up any primer on logic, and two of the first and most common terms one comes to learn is deduction and induction.

MnM November 30, 2008 at 9:58 pm

I'm getting the sense that you feel like my original comment was directed at you. I hope that isn't the case. I was referencing the post directly above you're first. Sorry if there was some confusion.

Ray G November 30, 2008 at 10:07 pm

Oh no, I thought you were referencing everyone speculating on the new New Deal versus the old New Deal. Not any post in particular.

That guy above my post is a troll. (No offense to the troll.)

I can't say for sure, but having done a lot of different forums – as have most of us probably – guys like this particular troll are usually a second identity of another regular poster.

That may not be the case with this one, but he's still a troll.

muirgeo November 30, 2008 at 10:58 pm

From the Will column;

"I say after eight years of this administration we have just as much unemployment as when we started," lamented Henry Morgenthau,

If only we could say the same of the last 8 years.

But again George Will and libertarians are exempt from critisms of double standards and using a posteriori events to make their priori argument.

You all are a bit to enthusiastic in arguing with some presumed deserved debate handicap to level the playing field. But when you can take a 120% increase in the Dow over 8 years and make it a bad thing I think your asking a bit much. Then again considering what you have to debate with I think its reasonable to give you all a head start. And a big one at that.

Sam Grove November 30, 2008 at 10:58 pm

So if the stock market goes up by the same amount for Obamaºs 8 years as it did for FDRºs it will be about 23,000 at the end of his term. AWEFUL!!!!

Some people don't get the effects of devaluation, do they?

Jimmy Carter (as played by Dan Akroyd on SNL): Inflation is your friend.

Trumpit December 1, 2008 at 1:08 am

Bob Higgs equates environmentalists with communists, real or imagined, during the long cold war with the Soviets. You can hear the pathetic academic yourself on Youtube. The proper equivalence is that Higgs is an environmental McCarthyite of the present day.

You've continenced enough death and destruction through worldwide environmental damage by filthy, unconscionable multinational corporations, Dr. Higgs. Have you no sense of decency, sir, at long last? Have you left no sense of decency?

Trumpit December 1, 2008 at 1:15 am

"Countenanced" is the correct spelling.

SaulOhio December 1, 2008 at 8:55 am

What some people don't seem to get is that all these numbers used as economic indicators, GDP, gross and net investment, stock indexes, and even unemployment figures, are like the guages and dials on a machine. They only mean something if they accurately report whats going on in the machine. Much of what government New Deal type measures do is like cracking open the dials on the guages and turning the indicator needles to the right setting by hand. It doesn't actually change what needs to be changed inside the machine, but instead throws off the calculations needed to run the machine properly. Then you are surprized that the boiler explodes on you!

When the government hires hundreds of thousands of people, or hands out money for businesses to use to hire workers, unemployment figures may drop (MAY drop. Money to subsidize all this comes from the rest of the economy and may cause more unemployment there.) But those workers aren't really employed. They are just on the public dole, accepting welfare while pretending to work.

All the resources the government diverts in all sorts of ways to re-arrange the numbers correctly keeps the economy from doing its job of producing the goods consumers want.

Anonymous December 1, 2008 at 2:55 pm

Obama should adopt McCain's idea to double the standard deduction. That would reduce withholding in each paycheck and put more money into consumers' wallets.

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