Economists: Still Dealing with New Deal

Seventy years on, the Great Depression continues to be the subject of argument among economists. It sometimes seems to be an economic Rorschach test that reveals fundamental beliefs about the ability of markets to correct themselves and the govenment to intervene effectively in the economy.

Another round of argument was sparked by this George Will column in the Washington Post criticizing the proposed increase in the federal minimum wage. Will writes: "A federal minimum wage is an idea whose time came in 1938, when public confidence in markets was at a nadir and the federal government's confidence in itself was at an apogee. This, in spite of the fact that with 19 percent unemployment and the economy contracting by 6.2 percent in 1938, the New Deal's frenetic attempts had failed to end, and perhaps had prolonged, the Depression."

Brad deLong says "A normal person would not argue that the New Deal prolonged the great depression... but George Will is not a Normal Person." James Hamilton gave more thoughtful consideration to the effects of the New Deal. Economist's View has Paul Krugman's take, and links to another of other posts on the subject.