1) Was there a fiscal stimulus
2) Did it shorten the Great Depression?
The tenative consensus answer is that the stimulus was small compared to, say, 10 years later, and that other factors probably contributed more than the fiscal stimulus.
But "other factors" were some things that FDR did. His bank holiday may not have been the best way to handle the crisis, but it handled the crisis, and ended the disastrous second banking panic. The FDIC, FSLIC, and so forth were created on his watch. Conservatives often write these bits out of the New Deal in order to argue that FDR's other actions prolonged the Great Depression, but these, too, were part of the New Deal. I'd say NIRA indisputably prolonged it, FDIC et. al. certainly shortened it significantly, some of the stuff he did was foolish but not really relevant (gold purchases, I'm looking at you!) and other things, like fiscal stimulus, are hard to measure. On net did the New Deal prolong the Great Depression? I view the banking reforms as dispositive, and NIRA didn't last that long, so on balance I'd say no, but that's a long and complicated dispute.
To be fair, liberals also conflate all the things that FDR did with "massive government spending programs", and it's equally wrong. It is not arguable, in my mind, that FDR's biggest contribution to fixing the mess was fixing the banks, not building dams. But the national narrative puts the FDIC somewhere down there with paying writers for taking oral histories of sharecroppers, and elevates the massive public works projects to center stage.
It's also important to point out--which I've done, like, eighty times--that this is not an argument over works projects. It's a technical question: how much does fiscal stimulus do to counteract a really nasty depression? This matters in part because we're not going to build the Hoover Dam again, and we don't need to--we have social insurance to deal with unemployment in a way that we didn't then, and so we don't need to create make work in order to keep people from starving.
Interesting. I'm not sure "everybody on well-fare" would really be preferable to "everybody on work-fare."
On a related topic, I think the high percentage of Americans on food-stamps shows some kind of structural problem, either with the program or with the nation. ("Food Stamp Participation in July 2008 Tops 29 Million")
On a related topic, I think the high percentage of Americans on food-stamps shows some kind of structural problem, either with the program or with the nation.
I'm not sure, 29 million people represent the bottom 10% of the country. At the moment I'd expect it to go up because people are losing their jobs and falling into the income ranges. However, as a whole are the percentages of people on food stamps going up, or is it more related to the population of the US in general goes up?
It's probably not a good idea to conflate "FDR" with the New Deal only, as we could conflate him with WWII as well (unless you want to give the credit solely to Hitler and Yamamoto). He was president long enough to be a king.
I wouldn't classify road and bridge improvements as "make work". We know the work needs to be done so we might as well do it now, when the economy needs a shot in the arm. If we were talking about paying people to dig holes and fill them up again you might have a point, but I didn't see anything in the stimulus to create an initiative of this type. Only time will tell how all the money ends up being spent, and I'm sure there will be some yokes downstream who will try and perhaps succeed at gaming the system. In the meantime, the one thing we DO know is that more money circulating in the economy = more spending = more jobs = less people losing jobs, businesses and homes, which is better for all of us. Speculation beyond that is really just mental masturbation, because the only real alternative here is to do nothing and stand aside and watch to see just how far down things can spiral.
More on patterns of food stamp use here.
Actually as I understand it there are those pushing the idea that building the Hoover Dam again, after tearing it down, would constitute an awesome stimulus.
Sanjay...who? Not to bite but you sound like Erin Burnett of CNBC, always brandishing the convenient "somepeople" to buttress her otherwise flacid arugment.
I have been at my computer trading and reading and listening to the play by play of this whole mess since September and I have not heard one person make the argument you just made.
Please advise.
k1
ryanculver.blogspot.com
Megan,
Did you see the Greg Mankiw post to which your colleague Andrew linked yesterday ("Newsflash: Economists Agree")? In that post, Mankiw listed fourteen propositions on which a majority of economists agree, according to various polls of the profession. The fourth one is the most relevant to the recent stimulus debate:
"We know the work needs to be done so we might as well do it now"
Ah, there's the rub. How do we know that these specific things need to be done? And doesn't it matter whether or not we do them well? Rushing long term infrastructure projects through without debate or oversight can waste a lot of money, and any stimulus is still likely to come too late to help.
"the only real alternative here is to do nothing"
Nonsense. There are plenty of alternatives, including having only real stimulus in one bill, and all the pork/long term projects/subsidies to special interest groups in one or more separate bills that get at least the usual amount of scrutiny. But that alternative was less desirable to the politicians, who wanted to sneak through projects that had been turned down in the past.
Megan,
"we don't need to create make work in order to keep people from starving."
You should probably tell us what we should do to keep people from starving then, considering food pantry charities all over the country are at record lows and begging for donations. Or whether you consider a nation of many millions of not-quite-starving-but-still-unemployed people to be an acceptable outcome the government shouldn't bother trying to fix.
"There are plenty of alternatives, including having only real stimulus in one bill, and all the pork/long term projects/subsidies to special interest groups in one or more separate bills that get at least the usual amount of scrutiny. But that alternative was less desirable to the politicians, who wanted to sneak through projects that had been turned down in the past."
Sneak through projects that...employ people to do things, yes? What percent of the stimulus, exactly, do you consider to be "pork" that would not lead to people getting hired (or saved from being fired) to do whatever money was being assigned for? Seriously, if there's one bill ever that should contain pork it's that one, since most of it pretty much meets the stated goals (put people to work doing *something*) almost by definition.
"because the only real alternative here is to do nothing and stand aside and watch to see just how far down things can spiral."
I'm fine with the government doing nothing given the distinct possibility that their intervention will just make things worse. We have to stop conflating government inaction with inaction among the public.
Every second of every day people are responding to the recession and making adjustments that will prepare us for a new era of growth. That job would be a lot easier if government would stop thrashing around like some retarded giant.
If government wants to help it could start by getting out of the way and paring back taxes and regulation. This crisis didn't start because the federal government wasn't spending enough and it won't end because we dig ourselves further into debt.
Sanjay was making a joke about the broken window fallacy.
Make work jobs are jobs that accomplish nothing, or at least not much compared to their cost.
Real life example: I worked for the social security admin one summer as the lowest of the low. My job that summer was painting the boxes they used to hold files. The theory was they could reuse the boxes if we painted over the magic marker file numbers.
The magic marker showed up through the paint, making it useless. We knew that by the end of the first day.
Three other guys and I kept painting boxes for a full month even though we told management it was pointless. In the end there were acres of useless boxes on shelves.
I don't feature that helping the economy. Not all labor is of equal value. To really help the economy the labor has to accomplish something that is roughly in line with the value spent. Otherwise its no better than welfare.
"...most of it pretty much meets the stated goals (put people to work doing *something*) almost by definition." -Adam
There is you "somepeople", k1.
Ah, there's the rub. How do we know that these specific things need to be done? And doesn't it matter whether or not we do them well?
Actually, no, there's not the rub.
We know from surveys that 40% of the nation's bridges need repair or reinforcement. Those figures are at least 5 years old, BTW; in the meantime we've done nothing and bridges have continued to collapse (at least one in Oklahoma and one in Minnesota in those same 5 years). And for the most part, we know how to repair or reinforce them, according to their design. So, the red herring about whether or not we "know" these things need to be done, and how can we be sure they're done right, really holds no more water under the terms of this stimulus than it would if they were being repaired under normal circumstances.
Adam,
I agree that pork shouldn't be the biggest concern in a stimulus bill. My biggest issue with the one Obama signed is that about three-fourths of the stimulus won't hit this year, when we need it most (the Fed predicts the economy will start to recover in 2010). Some amount of pork was probably necessary to grease the skids, but I don't see why a president with more legislative experience couldn't have gotten, say, ~$600 billion in stimulus this year in return for ~$200 billion in delayed pork. Even a fifty-fifty split between fast-acting fiscal stimulus (e.g., loans to states, increased unemployment assistance, tax credits for business investment, shovel-ready infrastructure, a payroll tax holiday, etc.) and other spending would have been better than what the president signed.
I believe the analogy to physicists writing the history of physics is inapposite. Physics is a hard science; economics a social science. That is not to denigrate economics, which is useful on a policy basis and benefits from the relatively modern emphasis (some would suggest overemphasis) on pure empiricism. Before I go further, let me not be misconstrued as objecting to such an emphasis - there are a variety of positive reasons behind this. (I might add that Paul Krugman opposes this point in a somewhat differenrt context here - http://www.slate.com/id/3629/entry/23743/ )
In any event, the New Deal was more than a direct set of observable policies; it was ultimately an attempt to substantially alter the cultural view of the correct relationship between government and citizens. The Progressive Era of 30 years prior had established government as the equalizing power to a citizenry increasingly overwhelmed by economic actors with aggregated power. The New Deal established that government could do more than simply check excess power and abuse; it could be an agent using its own power to steer preferred outcomes.
Perhaps most significantly, the New Deal was initially about confidence, which was sorely lacking. Putting people to work, even in makework situations, certainly have a multiplier effect, and certainly raised their dignity and support social structures which both feed and are fed by economic structures. That's not nothing. And Ross Douthat would exlain why it ultimately will effect GDP (marriage and famly and all that are both affected by and effect the economy).
What I think is lost in the purely empirical emphasis of economics is the pure irrationality of humanity, well captured at the micro level but presumed to be statistically negated at the macro level. Homo Econimus is a neat theoretical construct, but only that. When Bear Sterns lost 93% of its value over a weekend, that was a function ofpsychology, not empiricism. We can argue about the market receiving previously withheld information and we can also acknowledge Secretary Paulson's diktat as to the appropriate share price, but that can only account for most of the loss. And I hear you on Prisoner's Dilemma or uncertainty of asset value. But it still was ultimately a panic. However much we might defend the inherent internal rationality of a panic is still ultimately a psychological mechanism beyond econometric modeling.
That's where government can step in and its role as the ultimate power and the ultimate confidence booster (although that characterization is certainly being tested of late). The equivalent of a fiscal pep talk, that government will "do what's needed," is itself salutary. That's why I believe our president was somewhat correct when he said that his opponents wanted to do nothing. Because there is ultimately a philosophical difference as to what "doing something" means. People need to feel that the government will actively intervene and "do something," and not let matters continue to progress to an equivalent of the Great Depression. And I'm not certain that's the events of the last few months and disapprove that government can play that role. It's ultimately a counterfactual, but it's not unreasonable to suggest that things would not be far worse without the three-page TARP bill which proved ultimately misguided as an exercise in deft manipulation of the perfect economic levers.
Another way to make much of the same point as to suggest that Ms. McArdle's simple observation that there are only two questions to be answered - was there a fiscal stimulus and did it shorten the Great Depression, is seductive but reductive (how's that for a rhyme?). It's like modeling the weather based solely on a single low pressure system. No doubt that low pressure (or high pressure) systems can be the primary causative variables and why the weather on a given day in a given region is what it is. But they are ultimately overwhelmed by the presence of so many other variables. In that analogy may even be more charitable than I intended, as climatology is a hard science and it is much easier to acknowledge the extent of the effect of a pressure system. But to extend the imperfect analogy, a low pressure system (fiscal stimulus), can certainly be acknowledge to have altered the weather, but there will always be other factors as well, including the simple topography of the environment being acted upon.
I think this touches on a larger point about the philosphical differences in the a priori assumptionsof the liberatarian/semi-Statist disparity. I admit that I am now being reductive.
But I would submit, in an overly simplistic fashion, that the Libertarian/Objectivist model (or whatever you wish to call it), sees the market as an almost perfectly rational and efficient, presuming information flows freely. And efficiency is a virtue; hence, the market is sinless. Economic liberals (and for that matter their opposites in the social debate), have, in my opinion, a much healthier conception of original sin, and see the market as an aggregation of human behavior tainted by that same sin (which were I extending the theology, would itself be the product of concupiscence, but I digress). If one views the market as sinless due to its perfect efficiency, any intervention is itself a taint, a concupiscence that infects the outcome, and hurts all participants by depriving them of their natural order and position as Homo Econimus - the Alpha and Omega of ontogeny. But if one views the market as an organism already tainted, then intervention will follow upon much the same principles as human development within a single lifetime - agency is a positive and must be developed, but only within social structures with a moral overlay. Every human aspires to become dependent and control his/her outcome, though none of us are ever truly independent,pace Rudolph and Herbie.
Adam, there is the question of opportunity cost. No doubt all the porky projects create jobs, but is it better to spend money on those projects rather than the alternative?
I agree with Colin that the government doing nothing isn’t the same as people doing nothing and no bill is often better than a bad bill.
As a fallback scenario, I would have preferred Ann’s suggestion of splitting the bill into two or possibly several separate bills rather than trying to cram as many pet projects into a thousand page monstrosity that our elected officials probably didn’t have time to read and expecting them to vote on it immediately.
This matters in part because we're not going to build the Hoover Dam again, and we don't need to...
Actually we'd be better off tearing out a lot of dams. During the height of the dam building period (60s really) they used an extremely generous discount rate to justify a good portion of them.
Not really, that particular factoid is from 1989 and focused largely on rural bridges, many of which were closed but not demolished and continue to get listed on the “need repair or reinforcement” survey even as more modern bridges were the ones actually being used.
I call B.S. on the “we’ve done nothing” as federal, State and local governments have already spent billions on bridge maintenance since your 1989 factoid first came out. Oh and the 35W bridge that collapsed in Minnesota didn’t collapse due to a lack of maintenance, it was a design defect.
@Winston
So NONE of our bridges need fixing? None of our schools need upgrading? bThere is no need at all for new mass transit anywhere in the USA? Wow.
The people who advocate nothing can't lose, really. If you do something, and it doesn't work, they can say, "Aha. You shouldn't have done anything!" OTOH, if it worked, the do-nothing crowd can always say " It didn't really help" and "things would have gotten better by themselves anyway."Its heads I win, tails you lose.
Historically, Hoover didn't do anything much between 1929 and 1933-and unemployment went from 3% to 25% and thousands of banks failed. I suspect that there were lot of folks telling him to do nothing then, too- and explaining the importance of balancing budgets, trimming pork, and not letting government get too big. The do-nothing crowd is perennial -and generally, perennially wrong.
"we have social insurance to deal with unemployment in a way that we didn't then, and so we don't need to create make work in order to keep people from starving."
No nation in the industrial world, with the possible exception of Japan, has less of a public social insurance safety net for the unemployed, and Japan has a much stronger private safety net (with a substantial share of its full time industrial sector employees in lifetime employment arrangements).
The self-employed whose businesses fail (a big factor in the construction industry, for example), those who quit seeing the writing on the wall (or out of loyalty to fellow workers), and those who are fired (even for quite thin reasons) don't get unemployment benefits.
Even if you do get them, they are a fraction of your pay when employed, and are micromanaged with frequent (often weekly) progress reports on your job hunting required to continue to receive them. Unemployment payments in America are the scenic route to bankruptcy.
One can obtain COBRA coverage in lieu of your health insurance, but only at a cost in excess of your unemployment benefits (the stimulus bill has helps a little on this front). Those who don't are a burden on the public purse through Medicaid or emergency room funding, or simply a dead weight loss to society in suffering and possible permanent disability (I once had an uninsured manual laborer client with no family funds to draw upon who lost the use of his hand because he couldn't afford the time dependent follow up surgery he needed after a first trip to the E.R.).
Moreover, as in the Great Depression, resources in the form of investments, home equity, and access to credit that families would ordinarily rely upon in emergencies have evaporated. Credit card limits have been reduced. HELOC applications are often being denied. Home values declines and dropping used vehicle prices have eliminated home equity and car equity even if you reach the point of trying to sell your home or car to raise funds. The stock market is down 50% and even many comparatively safe corporate bonds have taken a beating. Reduced asset prices have also reduced the availability of 401(k) loans or premature IRA withdrawals.
Even if your employer is generous enough to provide severance pay, it is subject to tax withholding as if it was a bonus for someone who still had a job -- you'll recover it sometimes more than a year from now, but that is cold comfort to someone who needs cash now.
Food stamps don't provide diapers or rent. Public housing assistance has long waiting lists in the best of times. The paperwork necessary to qualify for food stamps, unemployment, Medicaid and school breakfast/lunch causes delay in getting relief, and discourages those who are apt with paperwork (unfortunately a lot of people and often people who are the first to be laid off).
There is also something to be said for work even when it is "make work" that wouldn't be economically worth doing in ordinary times. There is dignity and hope in work, and idleness can be corrosive. After too much time out of work, people become less able to transition back to the workplace well right away.
India's guaranteed job program is one of the most successful parts of its social safety net, is simple, and has also cut into under the table below minimum wage employee exploitation in the private sector.
One can only look for jobs so many hours a week, before running out of options. It is clearly better for the economy to have people doing something, anything useful, than to have them doing nothing at all but watching television.
In any case, most of the public works programs funded by the stimulus bill more than "make work." They are jobs that have to be done sooner or later by someone in any case.
Unemployment is fundamentally not a shortage of jobs, but a failure to the private sector to have the entrapreneurial ability to find something economically worthwhile for people to do. If the private sector isn't creative enough to find something for everybody to do, it is appropriate for government to come up with worthwhile ways to fill this gap in creativity until they do. Essentially, this is the macroeconomic equivalent of a parent (the government) telling their child (the private sector) -- "if you don't want to do your homework, your welcome to clean up the garage instead."
To go back a just a "little bit" further in history, one of the main reasons for the dynamic success of the early Islamic empire was that the pagan towns they conquered had a lot of idle people and a lot of work that needed to be done. The Islamic rulers that took over those towns rounded up the able bodies people and put them to work on productive tasks, resulting in a much more vibrant economic situation.
Ideally, money invested now in public works will reduce pressures on governments to make capital expenditures later, because there will be fewer pressing needs for public works then. So, when the economic is doing well again and the private sector faces labor shortages, government funded employment can be reduced.
Denver built its last county courthouse in the last Great Depression, and it so happens that the next one (as well as a new jail) have been perfectly timed to be providing jobs for this Great Recession. In the intervening seven decades, Denver got by without building a new courthouse (which it didn't urgently need in the 1930s), and so it was able have a somewhat larger public sector workforce in between.
George W. Bush signed a 285 billion dollar highway bill in 2005. Where did the money go? Why are we spending more on highway construction?
http://www.cbsnews.com/stories/2005/08/10/politics/main769547_page2.shtml
For what its worth, the banks used to organize their own bank holidays, rescues, etc before the Fed was created in by Wilson and all that self help was outlawed.
For example, the banks faced the 1907 bank runs by refusing unordinary cash witdrawals (payroll was OK and checks were honored) and bailed out tottering banks. When 1929, 32 and 37 hit, the Fed did nothing, organized nothing, soaked up the money supply and prevented the banks from doing their normal panic triage. Good job, fellas!
The problem with social safety nets in general is that they encourage riskier behavior and result in more falls. The problem with our safety net specifically is that it's made out of silly string.
People who are productive below the level of minimum wage are often doomed to stay unemployed (unless they get elected to Congress)because employers aren't allowed to pay them what they're worth. If they were allowed to work there way up, they could generate work and employment history that would allow the labor market to function better as they gained valuable work experience.
While we're at it, why is it that the people who argue for Keynesian stimulus fixes--provided that they are temporary and non-automatic--are so often the same people who argue that welfare should have the precise opposite characteristics. Could it possibly be that they want a permanent underclass to serve as a permanent voting block for the left?
What do you mean by "welfare"? And who are the people who argue that welfare payments should be automatic? Do you know any of them personally? Or are they members of Congress? I'd love to find out.
George W. Bush signed a 285 billion dollar highway bill in 2005. Where did the money go?
Probably to a bunch of contributors with no-bid contracts, who charged only 2 - 3 times what the cost would have been in an open-bidding process.
Seriously, after the past 8 years of open looting, it's a bit surprising to see people wringing their hands over spending that's targeted at helping people here in the US in a time of true economic crisis. When the Obama administration starts talking about setting all this up via no-bid contracts, then we can talk about how "wasteful" it all is. Until then, those of you who had no problem with the idea of running a war/Gulf reconstruction/etc. via the best-connected no-bid corporation need to, you know, sit down and shut up.
Jennifer: Until then, those of you who had no problem with the idea of running a war/Gulf reconstruction/etc. via the best-connected no-bid corporation need to, you know, sit down and shut up.
Did Hillary condemn Bill when he awarded no-bid contracts to Halliburton?
Until you can learn to be intellectually honest enough to not just reflexively criticize the last Republican administration for doing exactly what the previous Democratic administration did, Jennifer, you desperately need to sit down and shut up.
Sniveley: "Did Hillary condemn Bill when he awarded no-bid contracts to Halliburton?"
Gee, I dunno. What was the cost of Bosnia/Kosovo vs. the cost of Iraq? I'm guessing 5% or less, but that's a guess. Given that we didn't have tons of troops in theater in a conflict of much shorter duration, is it possible that it made more sense to get something done quick and dirty with a no-bid process? Were whistleblowers who pointed out the waste and fraud committed by the no-bid contractors in Bosnia/Kosovo demoted or fired (see: Greenlee, Bunnatine)? If fraud and corruption on the part of no-bid contractors in Bosnia/Kosovo was made publicly known, did the Clinton administration step in and announce that the government wouldn't seek repayment of the stolen funds?
There's a difference between going into what you know will be a years-long process and declaring up front that it's all going to be done via no-bid contracting - and then actively aiding your no-bid contractors in defrauding your government/citizens - and granting a no-bid contract for a short duration project where getting the pieces in place has to be done quickly and a no-bid contract pays dividends in terms of allowing you to pull things together in a short time frame. The dollar amounts are lower by a geometric scale when you have a shorter, known timeframe, which translates into a much lower cost for any fraud that may occur.
So, if we're going to talk about "intellecutal honesty", Mr. Apples and Grapefruits, you probably should have remained seated with mouth shut.
You have a fair point about how to apportion success or blame to the various parts of FDR's programs, and I agree the bank (and stock market) restructuring played a major role in restoring confidence and economic activity.
But I do take issue with characterizing the infrastructure programs as make work. Go a major reference library and seek out a large book publshed in 1939: Public Buildings,The Record of the Public Works Administration. It's an impressive summary of the buildings, bridges,and other infrastructure improvements created by the PWA during the 30s, many of which still play a daily role in our lives. Not all of them were public, by the way; the government assisted private industry, too, helping to finance the electrification of the Pennsylvania Railroad for example. In fact, the private hospital where I was born, Allegheny General in Pittsburgh, was completed with PWA funds and is included in this book.
Right, because its not like the Democratic Party has ever been associated with cronyism or corruption.
'... we're not going to build the Hoover Dam again.'
Guess what. Already we're spending $240 million -- 1/3 of the original cost of the dam (updated to today's dollars; quintuple the unadjusted original cost) -- to replace its use as a bridge.
http://en.wikipedia.org/wiki/Hoover_Dam_Bypass
'In the wake of the September 11, 2001 attacks, truck traffic over the Hoover Dam has been diverted south to a river crossing near Laughlin, Nevada, in an effort to safeguard the dam from hazardous spills or explosions.'
Construction of the new bridge adjacent to the dam started 3 years ago and is ongoing.
RKF:
What I think is lost in the purely empirical emphasis of economics is the pure irrationality of humanity, well captured at the micro level but presumed to be statistically negated at the macro level.
Well, for a start, very few humans are purely irrational. Even those who are severely mentally ill often have some rationality in their mental illness. For example, one of my relatives spent ten years convinced her husband was trying to kill her. No physical problem ever appeared and she eventually outlived him by a couple of decades, so either she was being irrational in believing he was trying to kill her, or he was trying to kill her by pursuing purely irrational means, such as asking the pretty fairies at the bottom of the garden to drop ground-up unicorn horns in her morning tea. Yet both of them managed things like eating when hungry, drinking when thirsty, coming in out of the rain, etc, so they weren't purely irrational. There may be some people who are purely irrational, but they tend to kill themselves either intentionally or through neglect, or they wind up in mental hospitals, and therefore one way or another are relatively unimportant to the direction of the macroeconomy. We may not be purely rational, but most of us are rational enough to know things like "if I want to harvest in the autumn I need to plant my crop in the spring" or whatever is apporpriate for the local environment or crop. The surrealists made some purely irrational statements, but I suspect that was mostly done on the at-least-rational-sounding theory of "make outrageous statement --> get media attention --> sell more art --> profit".
Secondly, macroeconomic theories often allow for some irrationality. For example, the Keynesian debate about sticky wages, or Keynes himself discussing animal spirits. Inflationary expectations are included in many macro monetary theories. There has been a wide-ranging debate over rational expectations theory, Riccardian equivalence, and the Efficient Markets Hypothesis, which is not compatible with the idea that rationality is just presumed to be statistically-negated (I'm not arguing here that all or any of these ideas are right, I am merely saying that because they have been argued over it is therefore false to accuse economics as a whole of just presuming that the irrationality of humanity is statistically-negated, there may be some individual economists who can be justly accused of presuming that, but not economics as a whole).
You also talk about the liberal conception of markets as allowing for perfect sin. What you miss is that many libertarians have responded to that point by observing that governments are also tainted by original sin (or whatever words were used by the liberals, which tends to be more commonly something like "humans are not perfectly rational"). If you consider both markets as tainted by the irrationality of humans, and governments as tainted by the irrationality of humans, and every other human institution as tainted by the irrationality of humans, then the case for intervening in the market does not automatically follow from the premise.
Every human aspires to become dependent and control his/her outcome, though none of us are ever truly independent,pace Rudolph and Herbie.
This is because nearly every human lives a life deeply affected by and dependent on other humans, and thus for a wide part of areas of our life, the more control one person gains the less control some other person has, or the less control multiple other people have. For example, say I want to control precisely what food gets grown, for that to happen farmers must follow my instructions, and therefore they lose some control over their lives. This is true regardless of the economic structure society uses.
Out of curiousity, RJK, why do you think you and so many other people feel free to criticise the current state of macroeconomics without bothering to check whether your criticisms are valid in the first place?
DaveinHackensack referenced a Mankiew blog entry on things economists agree on. However, Dave did not read the whole post. The final paragraph is:
"Note that the proposition about fiscal policy (#4) does not distinguish between taxes and spending as the best tool for purposes of macro stabilization. Maybe that question should be added in a future poll. I doubt, however, that the answer would make it onto this list of widely agreed upon propositions."
Rick
The bottom line is that FDR never managed to do away with the Great Depression. To get the economy to recover he needed the market to clear away malinvestments and for people who were capable of deploying capital effectively to invest in new ventures. But FDR failed on both counts because he propped up bad businesses by keeping prices artificially high and made so much noise about the 'rich' that few were willing to invest their capital due to the perceived risks involved.
What the US needs is another Harding, not another FDR.