Unfortunately Unfamiliar with Robert Higgs and Others: A Rejoinder to Gauti Eggertsson on the 1930s
In this rejoinder, I address five issues raised by Eggertssonâ€™s reply to my commentary. First, I argue that the pre-Depression gold standard, though not ideal, was not a barrier to a desirable reflation. I then offer an account of the 1937-38 recession that views it as a continuation of the Roosevelt regime in a way that contradicts Eggertssonâ€™s attempt to cleave it from the expectations-enhancing regime change he focused on. I also respond to his invoking the â€œconventional wisdomâ€ regarding Hoover and Roosevelt by offering additional evidence that said wisdom is faulty. Fourth, I respond to his admission of ignorance of Robert Higgsâ€™s work by recapping and adding to the evidence for regime uncertaintyâ€™s role in extending the Great Depression (evidence notably about private investment and about private-sector hours worked). I critically assess the role investment played in Eggertssonâ€™s original AER article by noting his failure to distinguish government and private investment, as it was the latter that Higgs demonstrates was affected by regime uncertainty and whose weakness constituted the failed recovery. Finally, I note that if narrow methodological strictures blind us to the evidence provided by narrative history, we will fail to understand that history at our own peril, as the growing parallels between the Great Recession and the Great Depression demonstrate.
Volume (Year): 8 (2011)
Issue (Month): 1 (January)
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- Michael D. Bordo & Ehsan U. Choudhri & Anna J. Schwartz, 1999.
"Was Expansionary Monetary Policy Feasible During the Great Contraction? An Examination of the Gold Standard Constraint,"
NBER Working Papers
7125, National Bureau of Economic Research, Inc.
- Bordo, Michael D. & Choudhri, Ehsan U. & Schwartz, Anna J., 2002. "Was Expansionary Monetary Policy Feasible during the Great Contraction? An Examination of the Gold Standard Constraint," Explorations in Economic History, Elsevier, vol. 39(1), pages 1-28, January.
- Gauti B. Eggertsson, 2005.
"Great expectations and the end of the depression,"
234, Federal Reserve Bank of New York.
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