Sunday, November 30, 2008

Krugman and the Depression

When Paul Krugman recently won the Nobel Prize, I was worried, not so much that he didn't deserve it for his earlier work, but that he would use the fame to legitimize his much less rigorous later work. My fears were proven correct when I saw his new book The Return of Depression Economics, or rather a rehash of his old book of the same name, staring at me from the shelves of the local Barnes & Noble, complete with a "Nobel Prize Winner" emblazoned on the front cover.

The Wall Street Journal, however, once again in defense of reality economics, has an interesting editorial on a topic in his book today:

This reality shows most clearly in the data -- everyone's data. During the Depression the federal government did not survey unemployment routinely as it does today. But a young economist named Stanley Lebergott helped the Bureau of Labor Statistics in Washington compile systematic unemployment data for that key period. He counted up what he called "regular work" such as a job as a school teacher or a job in the private sector. He intentionally did not include temporary jobs in emergency programs -- because to count a short-term, make-work project as a real job was to mask the anxiety of one who really didn't have regular work with long-term prospects.

The result is what we today call the Lebergott/Bureau of Labor Statistics series. They show one man in four was unemployed when Roosevelt took office. They show joblessness overall always above the 14% line from 1931 to 1940. Six years into the New Deal and its programs to create jobs or help organized labor, two in 10 men were unemployed. Mr. Lebergott went on to become one of America's premier economic historians at Wesleyan University. His data are what I cite. So do others, including our president-elect in the "60 Minutes" interview.

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