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Krugman’s Faux History

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Here’s a letter that I sent yesterday to the New York Times:

Paul Krugman’s history of the Great Depression and his interpretation of today’s intellectual debate over that episode are untrustworthy (“Misguided Monetary Mentalities [2],” Oct. 12).

For example, contrary to Mr. Krugman’s astonishingly uninformed assertion, government spending was not “slashed” during the early years of the Great Depression.  As economist Randall Holcombe has documented, under President Herbert Hoover (1929-1933) real per-capita federal spending rose by 82 percent – larger than the 74 percent rise in real per-capita federal spending from 1933-1940 [3].

Also contrary to Mr. Krugman’s implication, no serious economist today endorses a repeat of the early 1930s money-supply contraction.  For Mr. Krugman to suggest that arguments for monetary stability – arguments against further increases in the supply of money – are one with proposals for active deflationary monetary policy is ludicrous and unworthy of a Nobel laureate.

Donald J. Boudreaux