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Sunday, July 17, 2011

The danger of Wikipedia

The nice thing about Wikipedia is that you can always find a quote for every subject. The dangerous thing about it is that you can easily find yourself applying such quotes incorrectly when you clearly don't know a damn thing about the subject:
The easy thing now might be to proclaim that debt is evil and ask everyone — consumers, the federal government, state governments — to get thrifty. The pithiest version of that strategy comes from Andrew W. Mellon, the Treasury secretary when the Depression began: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate,” Mellon said, according to his boss, President Herbert Hoover. “It will purge the rottenness out of the system.”

History, however, has a different verdict. If governments stop spending at the same time that consumers do, the economy can enter a vicious cycle, as it did in Hoover’s day.
The minor point that David Leonhardt omitted from his article is the small fact that Hoover didn't listen to Mellon. Mellon's strategy was never enacted. Hoover overrode the objections of his "liquidationist" Secretary of the Treasury and embarked upon a spending program that was increased faster, in percent of GDP, than anything that FDR subsequently did. The failure of Herbert Hoover was not a failure of austerity, it was the same failure of Keynesian interventionism that FDR repeated.

There are 112 comments from the educated readers of the New York Times following the article. Not a single one points out this fundamental error. So, it appears that the old adage about those who refuse to learn from history are doomed to repeat it is more than a little applicable to the present situation.

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