Cole and Ohanian say:
Cole and Ohanian Reply: Paul Krugman claims our economic history is in "incredibly bad faith" by showing that industrial output is positively correlated with the wholesale price index. The main point of our op-ed, as well as our earlier work, is that most of the increase in per-capita output that occurred after 1933 was due to higher productivity – not higher labor input…
The first three paragraphs of Cole and Ohanian:
HStimulus and the Depression—The Untold Story: About one-half of President Obama's proposed $447 billion American Jobs Act consists of payroll tax holidays designed to boost spending and increase hiring. But these temporary policies will do little to jump-start the economy, much as earlier temporary economic Band-Aids, such as the 2009 stimulus, did little to improve the economy.
Proponents justify stimulus spending in part based on the widely held view that government-fueled increases in "aggregate demand" during FDR's New Deal ended the Great Depression and brought recovery. Christina Romer, former chairwoman of Obama's Council of Economic Advisers, has argued in op-eds that government should continue to spend for this reason. And in a 2002 speech as a Federal Reserve governor, current Fed Chairman Ben Bernanke claimed that monetary expansion and the turnaround from the deflation of 1932 to inflation in 1934 was a key reason that output expanded.
But boosting aggregate demand did not end the Great Depression. After the initial stock market crash of 1929 and subsequent economic plunge, a recovery began in the summer of 1932, well before the New Deal. The Federal Reserve Board's Index of Industrial production rose nearly 50% between the Depression's trough of July 1932 and June 1933. This was a period of significant deflation. Inflation began after June 1933, following the demise of the gold standard. Despite higher aggregate demand, industrial production was roughly flat over the following year...
I defy anybody to read the first three paragraphs of Cole and Ohanian and not believe that Cole and Ohanian's "main point" is that the level of production is unrelated to aggregate demand--that Romer and Bernanke are wrong in claiming a link. We are told that production "rose nearly 50%… [in] a period of significant deflation". We are told that "despite higher aggregate demand, industrial production was roughly flat…"
If Cole and Ohanian want to delete the first three paragraphs from their op-ed, that would be good.
If they want to keep those three paragraphs, it seems to me that Glasner is correct:
Misrepresenting the Recovery from the Great Depression: Though not wrong in every detail, the version of events offered by Cole and Ohanian is still a shocking distortion of what happened before FDR took office in March 1933…. The misrepresentation perpetrated by Cole and Ohanian only gets worse when they describe what happened during the period of true recovery, April through July 1933…