An Appeal for Help: Recent History of Economic Thought
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An Open Letter to Patricia Cohen of the New York Times (with Replies and Updates)

ORIGINAL 5:15 AM April 4:

Dear Ms. Cohen:

Eric Alterman speaks very highly of you indeed. And right now I am trying to resolve a certain... cognitive dissonance. The reports I got of the Council on Foreign Relations's conference last week on the Great Depression portrayed a day that was--frankly--insane.

We had Edward Prescott ranting about how the Depression came about because Herbert Hoover was not free market enough; denouncing "Hoover's anti-market, anti-globalization, anti-immigration, pro-cartelization policies"; and claiming that the economy only "started recovering in 1939, when... Roosevelt... called up the businessmen who had fled to England... and said please come back." I have never heard of a single one of the "businessmen who had fled to England" in the aftermath of Roosevelt's election, stayed there until 1939, and was then called back by Roosevelt.

And unemployment did fall from 23% in 1932 to 11% in 1939.

We had Ellen McGrattan misrepresenting my friend Christina Romer and claiming that because she is "using estimates of spending multipliers of about 1.5," she believes pure socialism in which we "have the government basically do everything." But Christy Romer says that she believes that the fiscal policy multiplier is 1.5 (or larger) now when unemployment is high--and thus that the government should do more right now--but that the multiplier drops to a very small value whenever unemployment is low.

We had Amity Shlaes claiming that "unemployment remained high throughout the decade" of the 1930s--in spite of its fall from 23% to 11%--because "the uncertainty created by Roosevelt’s continual tinkering paralyzed private investors"--in spite of the rise in inflation-adjusted private investment spending from $11 billion in 1932 to $77 billion in 1939.

Yet you seem to write of a quite different conference. I would have thought that Prescott's denunciation of Hoover, McGrattan's claim that the Obama administration seeks socialism (and their denials), and the striking disjunction between Shlaes's claims of little progress in unemployment and falling private investment in the 1930s and the reports of the Bureau of Labor Statistics and the Bureau of Economic Analysis would be... somewhat newsworthy.

Can you shed some light on the difference between the CFR conference as related by, say, James Galbraith and the conference that you attended?

Revisionist Views at a Conference on the Depression and the New Deal: For more than half a century, America’s political leaders — Republican and Democrat — have sought to wrap themselves in the legacy of Franklin Delano Roosevelt, the man credited with replacing fear with hope and ending the Great Depression. But in recent years some writers and economists have been telling a version of this story that is quite different from the one generally taught in school or seen on the History Channel. In this interpretation Roosevelt is a well-meaning but misguided dupe who not only prolonged the Depression but also exacerbated it. For many people, it’s like hearing that Little Red Riding Hood’s grandmother and not the wolf is the rapacious killer.

Since the financial crash this fall, the revisionist look at the Great Depression has attracted new attention; it even recently made its way onto Stephen Colbert’s television show. But more than that, it has become an intellectual banner for Republican opponents of the Obama administration’s ambitious bailout and stimulus proposals. Amity Shlaes, a syndicated columnist who works at the Council on Foreign Relations, helped ignite this latest revisionist spurt with her 2007 book, “The Forgotten Man: A New History of the Great Depression.” “The deepest problem was the intervention, the lack of faith in the marketplace,” she wrote, lumping Herbert Hoover and Roosevelt together as overzealous government meddlers. The current financial crisis, as well as continuing praise from conservatives, helped propel the book back onto the Times best-seller list in November. Jonathan Alter, an editor at Newsweek and the author of “The Defining Moment: FDR’s Hundred Days and the Triumph of Hope” — which has also benefited from the renewed fascination with the 1930s — calls Ms. Shlaes’s book a “taste badge,” flaunted by Republicans looking for a way to oppose the administration.

This week competing theories about the Depression and the New Deal were once again on display at a conference at the Council on Foreign Relations’ New York headquarters, co-hosted by the Leonard N. Stern School of Business at New York University, and partly organized by Ms. Shlaes. She and other critics of the New Deal credit Roosevelt with some important innovations, like restoring confidence in banks and establishing social insurance. Nonetheless, they argue that most of his mucking about in the economy crowded out private investment and antagonized the business world, and thus delayed recovery. Unemployment remained high throughout the decade until World War II, Ms. Shlaes told conference attendees, because the uncertainty created by Roosevelt’s continual tinkering paralyzed private investors. When the federal government keeps changing the rules, it’s like having Darth Vader in control, John H. Cochrane, a professor of finance at the University of Chicago Booth School of Business, said during a panel. “I have changed the deal,” he intoned like Vader, the “Star Wars” villain. “Pray I don’t change it any further.”

Many of the economists who were invited to speak were similarly skeptical of the New Deal, even if they disagreed on the Depression’s causes. “No episode in American history has been so misinterpreted as the Great Depression,” declared Richard K. Vedder, an economist at Ohio University. By artificially keeping prices and wages high, he argued, both Hoover and Roosevelt prevented the economy from adjusting, which is why unemployment remained in double digits until the United States entered the war. Anna Schwartz, who collaborated with Milton Friedman on a classic study of the Depression, and the Nobel Prize winner Robert E. Lucas Jr. argued that the idea of stimulating the economy with federal spending is a fairy tale. Government spending just crowds out private investment, they asserted; the money supply is the only thing that matters...

Sincerely yours,

J. Bradford DeLong

UPDATE 6:45 PM April 5: Patricia Cohen replies, and upgrades opinions-on-shape-of-earth-differ journalism to a moral imperative: "It would be completely inappropriate for me to declare one theory correct or incorrect, however, and had I inserted that into the piece, an editor would -- or certainly should -- take it out..."

Patricia Cohen replies:

Thanks for your note about my article. Let me give you a bit of a longwinded reply. Part of my beat is to cover what kind of intellectual currents are making their way through the scholarly world as well as the popular culture, regardless of whether I agree with them or not. I think it is particularly important to cover ideas that are often unpopular or have been dismissed by the mainstream yet are taken seriously by respected scholars or those that are making headway among large swaths of the public despite expert opinion. In 2007, for example, I wrote a story about how heterodox economists (like Jamie Galbraith) complained that they were being marginalized by neo-classical economists who dominated economic departments.

As I say in my first paragraph, FDR has been an idol to generations of Americans. The notion that he helped get the U.S. out of the Depression is taught is pretty much taught in public schools and secondary school textbooks across the country; Reagan continually invoked Roosevelt, recognizing his widespread appeal, etc. etc. So when an idea that has been on the fringe for decades -- that FDR actually made the Depression worse -- starts to make its way into the mainstream, that to me is newsworthy. The fact that the overwhelming weight of opinion continues to think it crazy, and yet it keeps making headway in unlikely places makes it all the more newsworthy. Whether or not one thinks Amity Shlaes' book belongs in the library or in the trash, it has clearly been very influential. The recent crash is one reason, reviving interest in a book that had come out in 2007 and had somewhat faded from public view, but more importantly, because it has been championed for political reasons by Republican opponents of Obama's economic policy (something that is noted very prominently in my article and commented upon by Jonathan Alter). That influence is what prompted Jonathan Chait for example to write a critique of it, which then made its way onto the Colbert show.

Now, the Council of Foreign Relations decides to sponsor a conference on the subject along with New York University's Business School -- not the Heritage Foundation or the American Enterprise Institute -- but the very soul of the traditional establishment and a liberal Eastern academic institution. The majority of people invited to speak, mostly economists, share the view that Roosevelt made things worse (although often for different reasons). Regardless of what one thinks of Ms. Shlaes book and scholarship, many of the economists who agree with her main thesis, are highly respected and hold positions of power -- 2 Nobel prize winners, Robert Lucas and Edward Prescott; Anna Schwartz; Harold Cole, an economist at Univ of Pa. and an advisor to the Fed; Price Fishback, etc. etc. There are knowledgeable people like yourself who may think what they say are rubbish, but I don't think you can argue that none of them deserve any coverage in the New York Times.

I give both sides the opportunity to state their main arguments, but because I am a news reporter and not an opinion writer, I don't take sides. I'm sure Mr. Galbraith articulated his view of the conference very effectively; Robert Rubin would have given a very different opinion on the parts of the conference he saw, as would Anna Schwartz. It would be completely inappropriate for me to declare one theory correct or incorrect, however, and had I inserted that into the piece, an editor would -- or certainly should -- take it out. What I can and should do is give the reader sufficient context -- for example, that most people still consider the idea that FDR made things worse preposterous; that the theory is being used partly for political purposes; that the pro-FDR people felt the panels were one-sided; that opinions about the Depression have become a kind of a litmus test for where people stand on Obama's economic policies.

There are scores of topics and relevant points that I could have discussed in a news story, but in 1,100 words, I clearly can't cover the waterfront. I did not, for instance, make any mention of the first panel on the causes of the Depression at which Edward Prescott spoke -- someone whom you mention in your post. (Even among conservatives, there is significant disagreement on that point.) Nor did I get into the fairly extended discussion of the fiscal multiplier effect, a topic that is interesting and important, but fairly technical and much more appropriate for the business pages than for the culture section, for which I write.

For interested readers, though, we link on the Internet to the entire CFR conference, so they can judge for themselves. In any event, I hope that answers your question to some extent.


Patti Cohen

UPDATE 2 8:15 PM April 5: Linda Hirshman is displeased by Patti Cohen's claim thqt "because I am a news reporter and not an opinion writer, I don't take sides." She emails:

[T]his “but because I am a news reporter and not an opinion writer, I don't take sides” is pretty outrageous. When Patricia Cohen disagreed with [me]... she attacked me in the first person, broadside, her opinion, no research, no fair and balanced, not even in the FOX sense of the phrase....

That Ms. Hirshman's views on family life now sound so radical is a testament to how roundly the mainstream has rejected them. While rigid doctrines may have made sense in the early days, they don't now, when major goals have been won and a more diverse group of women are in the picture. Indeed, the common critique of the women's movement in the 60's and 70's was that it was too elitist and dogmatic, that it didn't respect women who wanted to stay home...


That is why edicts that order women either to get out of the house or to stay there inevitably resurface. Issuing marching orders is simple. "Viva la revolución!" is a lot catchier than "Muddle Through!" It's just not helpful...

I may be wrong (although of course I don’t think so).... But regardless of whether Linda Hirshman is wrong or right or crazy, Patricia Cohen is the furthest thing from a "news reporter and not an opinion writer"...

UPDATE 3: 8:04 AM April 6: Patricia Cohen's email of last night--quoted in full above--contained no request for confidentiality (which I was always taught had to be negotiated in advance). Nevertheless, this morning she writes:

That email was a response to the email you sent me, and I did not realize you were going to ignore my request not to post it on your website.

For the sake of clarity, could you please note in response to Linda Hirshman's post that the article regarding her work ran in the Week in Review, which runs analysis and opinion, and not in the daily news report.

I posted her email because (a) it was a response--which one rarely gets: the New York Times's SOP is "we have the megaphone and you do not"--(b) it was an intelligent and well-written response, and (c) it lays out a point of view--the opinions-of-shape-of-earth-differ journalism response that "yes, I know these people I am covering are very strange, but it would be unethical to do more than quietly hint to my readers what I in fact believe to be the case"--that I think is completely wrong but am always anxious to learn more about.

Thus when Cohen writes:

[B]ecause I am a news reporter and not an opinion writer, I don't take sides.... It would be completely inappropriate for me to declare one theory correct or incorrect...

She immediately follows it with:

What I can and should do is give the reader sufficient context -- for example, that most people still consider the idea that FDR made things worse preposterous; that the theory is being used partly for political purposes; that the pro-FDR people felt the panels were one-sided; that opinions about the Depression have become a kind of a litmus test for where people stand on Obama's economic policies...

Which I can read in no way other than: I have to appear to be impartial, but actually my thumb is on the scale--and on your side.