Whenever conservatives want support for their policies of free market capitalism, they often cite a study by two UCLA economists on the New Deal. The article is New Deal Policies and the Persistence of the Great Depression by Cole and Ohanion (you can find it on-line, via Google). It runs about 75 pages. In short, it proposes that the Great Depression was lengthened by New Deal policies, specifically the National Industrial Recovery Act (NIRA), which inflated prices and thus reduced demand for goods.
The good professors have prepared a number of impressive looking formulas to support their contention; I will leave their dissection to real economists. However, even if their mathematical models are correct, their analysis is fatally undermined by a number of false premises and outright distortions. For those interested, my analysis follows, and will be longish to cover the many shortcomings in the Cole and Ohanion article.
Their argument is based on a number of assumptions, some stated, others underlying, which do not hold up. First, their study focuses solely on the NIRA and posits that this was the most important and central facet of New Deal policies. Any reading of New Deal history shows that they have way over emphasized the importance of the NIRA, both in substance and as to its role. An underlying assumption is that FDR had a coherent ideology and set of policies, of which the NIRA was the center post. FDR was no ideologue and many of the New Deal policies were ad hoc, including the NIRA. A little background is in order. FDR and his advisers thought that the major problem was over production (when, in fact, it was lack of demand). The US had been in a deflationary spiral for about 3 years and prices and wages had both plummeted. However, the courts had ruled unconstitutional government efforts to enact any laws governing wages, hours, or, in some cases, even restricting child labor. The NIRA was an attempt to address this problem by requiring companies engaged in interstate commerce to reach agreement with the federal government over working conditions and production. Thus, it tried to reduce production and inflate the economy. The law was passed during the 100 Days, but it was not until September/October of 1933 that agreements had been hammered out with those industries which participated. The law was declared unconstitutional in May, 1935 (Schecter vs. US, or the "sick chicken" case). The law had ceased to be effective even before May, 1935, so it was only really influential for about a year.
By agreeing to the NIRA, a company was allowed to post a blue sticker and people were encouraged to do business only with those companies who had taken part. However, not every major company did participate. Ford Motors, as one large example, never participated. And with those who did sign agreements, there was a serious problem in enforcing compliance with the agreements. Thus, we have a law that was in actual effect for only about a year and which covered only a portion of manufacturers and retailers. Arthur Schlesinger in The Coming of the New Deal, Chapters 6-10 has a comprehensive account of the NIRA and its implementation.
Just from this short background sketch, it is obvious of some glaring weaknesses with the Cole and Ohanion study. By focusing on only a portion of the economy and legislation that was only in actual effect for about a year, it seems beyond plausibility to think that this one law was responsible for lengthening the Great Depression. According to Cole and Ohanion's own article, agriculture employed 30% of all workers at this time. When you consider those engaged in the service industry, the unemployed, and those not participating in NIRA, it is obvious that this law affected much less than one half of the economy for only a year. Further, the authors suppose that the NIRA was affecting the economy even after it was declared unconstitutional. They propose that 75% of manufacturers were still affected by the NIRA after 1935, a percentage they seemed to have pulled out of thin air. Even if their number is close to correct, because it only affected a segment of the economy, it would mean only a third of the economy, at most, would have been affected by the NIRA after 1935. However, even a third would undoubtedly be vastly over stated, since many industries never complied with their agreements in the first place and most all ceased following them after the court decision.
Another problem with Cole and Ohanion is that the NIRA was never that important to begin with. It was only one of many bills which sought to address the problems of the Depression. Cole and Ohanion totally ignore all the jobs programs such as PWA, WPA, and CCC. They ignore things like the the Social Security Act which included unemployment insurance. They totally ignore the Agricultural Adjustment Act, which FDR considered one of the most important aspects of the New Deal, and the whole agricultural portion of the economy. They ignore the TVA and the REA and their importance in economic development. In short, by focusing on one small aspect of the New Deal, their analysis is woefully incomplete and pretty much worthless.
Another problem with Cole and Ohanion is other assumptions they make. They assume that the economy would have recovered on its own without any government action. And yet, this is the position which the Hoover Administration took. As a result, unemployment went from about 3.5% to about 25% and the GDP dropped around 40% over three and on-half years because of government inaction. It was only in the last six months or so of the Hoover Administration, when it was obvious that classical economic theory had totally failed, that he belatedly tried to stimulate the economy with the RFC (Reconstruction Finance Corporation), which never actually accomplished much of anything. Cole and Ohanion look at the New Deal as if it were something apart from the history which preceded it. They ignore the deflationary spiral which preceded it, the total collapse of the economy which made a normal recovery next to impossible. In congressional hearings prior to FDR taking office, economists and business leaders admitted that their ec0onomic theories had failed and they were at a loss about what to do next. FDR was an experimenter who had few fixed ideas. He staffed his administration with people who often had opposing views about how to restore the economy and he would sometimes play one off against another. He was the ultimate pragmatist who relied on what worked. Cole and Ohanion state that by 1939 unemployment had dropped to 11% from 25% and yet they count FDR's policies as having failed and lengthened the Depression. They don't mention that by 1939 the GDP had almost doubled since FDR took office in 1933. That's some failure.
Like most of the Chicago school, they ignore the whole issue of demand. They assume that higher profits by companies would lead to more employment, totally ignoring the demand function. As we see today with companies sitting on record profits, lack of demand suppresses hiring much more than profits encourage it. In their analysis they never look at things like household income or other measures of demand/consumption. They do include a little on consumption, but it is almost an after thought.
Finally, in their analysis they put a lot of emphasis on monopoly and strikes and lay the 1937 recession to strike activity. They ignore the fact that 1937 was the only year that FDR cut back on spending and had a balanced budget and that it was the first year of the collection of social security taxes. Social Security did not make its first payments until 1940, so it was a temporary drag on the economy. Also, it is ironic that they fault the FDR Administration for failing to enforce monopoly statutes prior to 1940, since to regulate business this way violates one of the basic tenets of conservative economics that the market should be free to police itself. I wonder if they are quick to criticize Reagan and Bush for failing to restrict monopolies? Hence, in addition to using a very short sighted analysis, they seem intellectually inconsistent if not outright dishonest.
I believe the fact that conservatives, even so-called intellectual conservatives, rely on such flawed scholarship is a testament to the bankruptcy of their theories. So much of core conservative values today are based on belief, and not evidence. Time and again I see the same statements made over and over again, without any supporting evidence; as if repeating something often enough will make it true. It is worth remembering something said by an unnamed top Bush official (I believe it probably was Karl Rove). To paraphrase, when a journalist pointed out something he said that was incorrect, the official said to the effect, "You live in a reality based world. We create our own reality." Is it any surprise that conservatives are largely coincident with fundamentalist Christians?
Friday, July 15, 2011
Sunday, July 10, 2011
AN APPRECIATION OF DOGS
The recent passing of my brother's dog has reminded me just how important the canine species is to homo sapiens. I am blessed with two wonderful dogs. The first is a miniature or Italian greyhound and the second is a lovable mutt who seems to be part shepherd and either husky, malamute, and who knows what else. The Italian greyhound is the best behaved dog I have had and the second is the best all around dog I have ever had.
There is an old saying in politics that if you are in Washington D.C. and need a friend, then get a dog. However, I don't think that should be limited to Washington. There is no better friend than a dog. Charles DeGaulle reportedly said something to the effect that, "The more I learn about people, the more I appreciate dogs." The vast majority of dogs, it is sad to say, is better than the vast majority of people. Most people harp on a dog's loyalty, but that is only a small part of their value. We can learn a lot from dogs. Mark Twain said to the effect that, "If you bring in a stray dog and feed it, you will have a friend for life. And that, my friends, is the main difference between a man and a dog." The way I phrase it is that if you are nice to a dog and treat it well, it will like you and be nice back. However, that is not true for far too many humans. Dogs don't care what you look like, how much money you have, what kind of car you drive, what clothes you wear. What is important to them is how well you treat them, or in short, the nature of your character. It has been said that virtue is its own reward. That's important to remember, since it doesn't seem to be rewarded very often in modern society. Dogs appreciate the virtuous person, more than our fellow humans do. Dogs live in the moment, they do not dwell in the past nor worry about their future. It does not take much to make a dog happy; meet his/her basic needs and throw in some exercise and play and a dog is as content as can be. These are important life lessons we would all do well to heed.
If you are a dog owner or are considering becoming one, I recommend that you watch the show The Dog Whisperer on the National Geographic Channel. Not only do you learn a lot about dogs, you learn a lot about people and life. One thing which I find particularly instructive is that when people are having problems with their dogs, very often it is the owner who has the problem, not the dog. Dogs have an amazing ability to pick up our feelings and emotions, even when we are not aware of them ourselves. Many times the Dog Whisperer will find that an owner will communicate anxiety and/or fear which the dog feeds off of. After watching the show, I have seen this with some other dog owners.
Scientists are finding out that dogs are much smarter than was previously thought. A border collie recently was found to know/understand over 300 separate words. Even your average dog without any training can pick up a couple of dozen words. Stanley Koren, who has written several dog books and has a Phd. in Psychology, estimates that dogs have the equivalent intelligence of a 3 or 4 year old human. And, when it comes to picking up cues from humans, dogs may be even better than many humans. An experiment which I found very interesting showed that in this regard dogs are smarter than chimps. Dogs instinctively know what it means when a human points; chimps do not understand the significance of that motion. The experiement was done with a dog that had not interacted with humans before, yet that dog knew what pointing meant while the chimp did not.
Yet we must remember one of my adages. A dog is a dog, nothing more, nothing less. By that I mean that while they share their lives with us, treasure our companionship, and give us their love, they are not little humans. Some people seem to want to anthropomorphize their pets. Because they are dogs, they do have distinct instincts and needs which differ from our own. Thus, they are nothing more than dogs. On the other hand, dogs have shown themselves to be much smarter than previously thought and are truly a boon companion. So, a dog is truly an important species which contributes greatly to human welfare. Researchers have found that the mere act of petting a dog lowers one's blood pressure and reduces anxiety. That is why they have therapy dogs, not therapy any other animal. Throughout human history dogs have helped us, guarding our flocks, herding our sheep, aiding us in our hunting. Dogs can sniff out drugs, explosives, and even cancer. They can help find trapped survivors in disasters, corpses under rubble and, of course, provide immense help to the disabled. What other animal does so much for us?
Finally, I want to pass along two of my favorite dog stories. The first one from a book recounts the story of a feral dog who would scavange the trash cans behind a restaurant. Someone noticed that the dog would take some food a short distance away and eat it, then take some other food and trot off. Curious, the observer decided to follow the dog to see what he did with the food he didn't eat immediately. The dog trotted along into a nearby woods and after a half mile or so came to a hole in the ground and dropped the food into the hole. The observer watched the dog do this a couple of days in a row and finally approached the hole. Inside an abandoned mine another dog had fallen in and was unable to get out. The first dog must have heard the cries of the trapped animal and dutifully brought food to it every day, proving that dogs certainly have a nobleness of purpose.
The second story is from a TV show I saw about dogs. The teller of the tale is now a veterinarian and he told of how he grew up on a farm with a family dog. One day he and his older brother decided to go with their father out to fix some fence. The brother put his bike in the back of their pick up truck and rode in the back with their dog. As their work was finishing, the brother decided to take his bike and ride back, as that was why had had brought it. After a bit the father, younger brother and the dog in the back began the drive back over a dirt road. All of the sudden the dog jumped out of the truck and began running alongside the truck, barking loudly. The boy and his father couldn't understand this unusual behavior, slowed down a bit, but kept going. Suddenly the dog sped up and ran in front of the truck. Although the father slammed on the brakes, he couldn't stop in time and ran over the dog, killing him. However, in doing so, he stopped in time to avoid running over his older son. He had fallen off his bike and was hurt, lying in the middle of the road at the bottom of a small rise. Because of the nature of the road, the driver wouldn't have been able to see his son in time to stop, but the dog somehow knew that the boy was in danger and ultimately sacrificed his life for that of the boy's. You can have no better friend than a good dog.
There is an old saying in politics that if you are in Washington D.C. and need a friend, then get a dog. However, I don't think that should be limited to Washington. There is no better friend than a dog. Charles DeGaulle reportedly said something to the effect that, "The more I learn about people, the more I appreciate dogs." The vast majority of dogs, it is sad to say, is better than the vast majority of people. Most people harp on a dog's loyalty, but that is only a small part of their value. We can learn a lot from dogs. Mark Twain said to the effect that, "If you bring in a stray dog and feed it, you will have a friend for life. And that, my friends, is the main difference between a man and a dog." The way I phrase it is that if you are nice to a dog and treat it well, it will like you and be nice back. However, that is not true for far too many humans. Dogs don't care what you look like, how much money you have, what kind of car you drive, what clothes you wear. What is important to them is how well you treat them, or in short, the nature of your character. It has been said that virtue is its own reward. That's important to remember, since it doesn't seem to be rewarded very often in modern society. Dogs appreciate the virtuous person, more than our fellow humans do. Dogs live in the moment, they do not dwell in the past nor worry about their future. It does not take much to make a dog happy; meet his/her basic needs and throw in some exercise and play and a dog is as content as can be. These are important life lessons we would all do well to heed.
If you are a dog owner or are considering becoming one, I recommend that you watch the show The Dog Whisperer on the National Geographic Channel. Not only do you learn a lot about dogs, you learn a lot about people and life. One thing which I find particularly instructive is that when people are having problems with their dogs, very often it is the owner who has the problem, not the dog. Dogs have an amazing ability to pick up our feelings and emotions, even when we are not aware of them ourselves. Many times the Dog Whisperer will find that an owner will communicate anxiety and/or fear which the dog feeds off of. After watching the show, I have seen this with some other dog owners.
Scientists are finding out that dogs are much smarter than was previously thought. A border collie recently was found to know/understand over 300 separate words. Even your average dog without any training can pick up a couple of dozen words. Stanley Koren, who has written several dog books and has a Phd. in Psychology, estimates that dogs have the equivalent intelligence of a 3 or 4 year old human. And, when it comes to picking up cues from humans, dogs may be even better than many humans. An experiment which I found very interesting showed that in this regard dogs are smarter than chimps. Dogs instinctively know what it means when a human points; chimps do not understand the significance of that motion. The experiement was done with a dog that had not interacted with humans before, yet that dog knew what pointing meant while the chimp did not.
Yet we must remember one of my adages. A dog is a dog, nothing more, nothing less. By that I mean that while they share their lives with us, treasure our companionship, and give us their love, they are not little humans. Some people seem to want to anthropomorphize their pets. Because they are dogs, they do have distinct instincts and needs which differ from our own. Thus, they are nothing more than dogs. On the other hand, dogs have shown themselves to be much smarter than previously thought and are truly a boon companion. So, a dog is truly an important species which contributes greatly to human welfare. Researchers have found that the mere act of petting a dog lowers one's blood pressure and reduces anxiety. That is why they have therapy dogs, not therapy any other animal. Throughout human history dogs have helped us, guarding our flocks, herding our sheep, aiding us in our hunting. Dogs can sniff out drugs, explosives, and even cancer. They can help find trapped survivors in disasters, corpses under rubble and, of course, provide immense help to the disabled. What other animal does so much for us?
Finally, I want to pass along two of my favorite dog stories. The first one from a book recounts the story of a feral dog who would scavange the trash cans behind a restaurant. Someone noticed that the dog would take some food a short distance away and eat it, then take some other food and trot off. Curious, the observer decided to follow the dog to see what he did with the food he didn't eat immediately. The dog trotted along into a nearby woods and after a half mile or so came to a hole in the ground and dropped the food into the hole. The observer watched the dog do this a couple of days in a row and finally approached the hole. Inside an abandoned mine another dog had fallen in and was unable to get out. The first dog must have heard the cries of the trapped animal and dutifully brought food to it every day, proving that dogs certainly have a nobleness of purpose.
The second story is from a TV show I saw about dogs. The teller of the tale is now a veterinarian and he told of how he grew up on a farm with a family dog. One day he and his older brother decided to go with their father out to fix some fence. The brother put his bike in the back of their pick up truck and rode in the back with their dog. As their work was finishing, the brother decided to take his bike and ride back, as that was why had had brought it. After a bit the father, younger brother and the dog in the back began the drive back over a dirt road. All of the sudden the dog jumped out of the truck and began running alongside the truck, barking loudly. The boy and his father couldn't understand this unusual behavior, slowed down a bit, but kept going. Suddenly the dog sped up and ran in front of the truck. Although the father slammed on the brakes, he couldn't stop in time and ran over the dog, killing him. However, in doing so, he stopped in time to avoid running over his older son. He had fallen off his bike and was hurt, lying in the middle of the road at the bottom of a small rise. Because of the nature of the road, the driver wouldn't have been able to see his son in time to stop, but the dog somehow knew that the boy was in danger and ultimately sacrificed his life for that of the boy's. You can have no better friend than a good dog.
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