Milton Friedman — an intellectually dishonest peddler of neoliberalism

24 Oct, 2021 at 09:59 | Posted in Economics | 23 Comments

Last Friday, November 9, saw the big “Milton Friedman Centennial” celebration at the University of Chicago’s Becker Friedman Institute for Research in Economics. It was a big day for fans of one of the Founding Fathers of neoliberal/libertarian  free-market ideology …

The Destruction of our World and the lies of Milton Friedman One episode in Milton Friedman’s career not celebrated (or even acknowledged) at last week’s centennial took place in 1946, the same year Friedman began peddling his pro-business “free market economics” ideology.

According to Congressional hearings on illegal lobbying activities ’46 was the year that Milton Friedman and his U Chicago cohort George Stigler arranged an under-the-table deal with a Washington lobbying executive to pump out covert propaganda for the national real estate lobby in exchange for a hefty payout, the terms of which were never meant to be released to the public.

The arrangement between Friedman and Stigler with the Washington real estate lobbyist was finally revealed during he Buchanan Committee hearings on illegal lobbying activities in 1950. But then it was almost entirely forgotten, including apparently by those celebrating the “Milton Friedman Centennial” last week in Chicago.

Mark Ames

23 Comments

  1. @rsm
    None of your references relate to USA agriculture 1915-35.
    You pontificate, without producing any evidence, that lower prices after WW1 led to increased production.
    However, USDA Censuses clearly show significant DECLINES in the output of most major crops after WW1. For example:

    1919 1924 1929 1934 1939
    Corn for grain (millions of bushels)
    2346 1824 2130 1169 2311

    Threshed wheat (millions of bushels)
    945 801 801 513 709

    Click to access 1940-03-08.pdf

    • Kingsley, did I not quote FDR on his immediate problem of overproduction, in 1933?
      .
      May I tell a story of agricultural overproduction sustained through exports and easy bank loans, then after 1929 banks called in loans so farmers produced more, causing the Dust Bowl? Is that story essentially what Henry’s dust bowl link said, too?
      .
      Are you claiming food scarcity due to underproduction was significant in the Great Depression?
      .
      《The total acreage of wheat harvested in 1939 was 50,526,015 acres or a reduction of 18.5 percent from the 61,99(),908 acres harvested in 1929. The wheat acreage harvested in 1939, however, exceeded the 1934 acreage by 20.5 percent because of the heavy loss of acreage that year from drought particularly In the western Great Plains. Acreage seeded for harvest in 1939 was materially reduced from the years immediately preceding mainly because of acute moisture shortage at seeding time on the Great Plains, partly because of lower prices for the 1938 crop, and partly because of allotments established by the Agricultural Adjustment Administration for the 1939 crop. Abandonment of seeded wheat acreage was heavy in several States in the western Great Plains area where drought conditions continued through 1939.》
      .
      Drought was a factor, but wasn’t farm overproduction still driving prices lower throughout the 1930s? And government policy throughout also aimed at supply destruction?
      .
      If you look on the maps of the link you helpfully supplied, can you see that many products increased (fruit and nuts, irish potatoes) during the Dust Bowl?
      .
      In short, was the Great Depression emphatically not an example of Malthusian collapse? Was overproduction (a Keynesian might say lack of demand) the overriding problem?
      .
      Isn’t my story just wikipedia’s, too? https://en.m.wikipedia.org/wiki/Agricultural_Adjustment_Act
      .
      《When President Franklin D. Roosevelt took office in March 1933, the United States was in the midst of the Great Depression.[8] “Farmers faced the most severe economic situation and lowest agricultural prices since the 1890s.”[8] “Overproduction and a shrinking international market had driven down agricultural prices.”[9] 》
      .
      《In 1935, the income generated by farms was 50 percent higher than it was in 1932, which was partly due to farm programs such as the AAA.》

  2. Robert,
    .
    I said two things and I quote:
    .
    “World farm product prices had been in downtrend for a decade by the early 1930s.
    .
    There were also severe droughts in the US in the early 1930s which affected farm production.”
    .
    The first statement is in keeping with your point about oversupply. This was in part caused by the introduction of new technology and methods and also because of the general deflation that was in the air at the time.
    .
    The second is a statement of fact. It may have not impacted all farmers and farm production through the whole of the Depression but it periodically impacted enough farmers to cause their financial demise and the demise of thousands of small local banks.
    .
    As far as Friedman is concerned I have only ever read the general claims made about him and have not closely studied his work. So I have no interest in going there.
    .
    You have stirred up a Depression like dust storm here in your usual hyperbolic way and I am in no way interested in further helping mollify the multiple bees that are currently circulating in your bonnet. 🙂

    • 《it periodically impacted enough farmers to cause their financial demise and the demise of thousands of small local banks.》
      .
      Could this have easily been fixed with a basic income?

  3. Friedman was an ideologue of the right, whose intellectual opportunism in pursuit of his political agenda has often been heavy-handed and sometimes even laughable. The numerous errors and rewritings of history in Friedman’s large collection of popular writings are spelled out in admirable detail in Elton Rayack’s book Not So Free To Choose.

    His “minimal government” ideology has never extended to attacking the military-industrial complex and imperialist policies; in parallel with Reaganism and the demands of the corporate community, his assault on government “pyramid building” was confined to civil functions of government. As with the other Chicago boys, totalitarianism in Chile did not upset Friedman-its triumphs in dismantling the welfare state and disempowering mass organizations, even if by the use of torture and murder, made it a positive achiever for him.

    In August 1972, a case study of the methodology of neoclassical economics by Imre Lakatos’s London School of Economics colleague Spiro Latsis published in The British Journal for the Philosophy of Science found Milton Friedman’s methodology to be ‘pseudo-scientific’ in terms of Lakatos’s evaluative philosophy of science, according to which the demarcation between scientific and pseudo-scientific theories consists of their at least predicting testable empirical novel facts or not. -in Situational Determinism in Economics S.J Latsis The British Journal for the Philosophy of Science, 23, p 207-45.

    Three years later, in 1976, Friedman was awarded the so called “Nobel Prize for Economics”

    Milton Friedman´s whole methodology and his result was critised early on by many,highly reputably economist. Not only Cambridge keynsians as Nicholas Kaldor, Joan Robinson etc.also many american economists like James Tobin, Robert Solow and Paul Samuelson was highly critical on many levels of Friedman´s work.

    Friedman argued that only the evidence, not the plausibility of the assumptions, should decide about the validity of a theory.

    Friedman used to say that “assumptions don’t matter”. In fact, he preferred theories with seemingly unrealistic assumptions – an attitude that Paul Krugman describe in Peddling Prosperity, 1994 in this way: “I think it is fair to say that up until the late 1960s Friedman and his followers, while influential, were regarded by many of their colleagues as faintly disreputable.”

    Economic professor Edward Herman,writes in Triumph of the Market (1995), p. 36. that “Friedman’s methodology in attempting to prove his models have set a new standard in opportunism, manipulation, and the abuse of scientific method.”

    Friedman argued that only the evidence, not the plausibility of the assumptions, should decide about the validity of a theory. He used to say that “assumptions don’t matter”. In fact, he preferred theories with seemingly unrealistic assumptions – an attitude that Paul Krugman describe in Peddling Prosperity in this way: “I think it is fair to say that up until the late 1960s Friedman and his followers, while influential, were regarded by many of their colleagues as faintly disreputable.”

    Economic professor Edward Herman,writes in Triumph of the Market (1995), p. 36. that “Friedman’s methodology in attempting to prove his models have set a new standard in opportunism, manipulation, and the abuse of scientific method.”

    It seems that Friedman´s most pathbreaking innovation as an economist has been in the art of what is called “massaging the data” to arrive at preferred conclusions.

    In July 1970 Nicholas Kaldor wrote an article in the Lloyd’s Bank Review in which he questioned Friedman’s empirical assertions. Friedman replied — in the same journal in October — that:
    “Asking how Professor Kaldor would explain the existence of essentially the same relation between money and income… for the UK as for the US, Yugoslavia, Greece, Israel, India, Japan, Korea, Chile and Brazil?”

    The problem with this? Friedman just made it up. No such relation existed.
    Kaldor write in his ‘The Scourge of Monetarism’:

    “The simple answer to this is that Friedman’s assertions lack any factual foundation whatsoever. They have no basis in fact, and he seems to me to have invented them on the spur of the moment. I had the relevant figures extracted from the IMF statistics for 1958 and for each of the years 1968 to 1979, for every country mentioned by Friedman and a few others besides… Though there are some countries (among which the US is conspicuous) where in terms of the M3 the ratio has been fairly stable over the period of observation, this was not true of the majority of others.”Kaldor, N. 1982. The Scourge of Monetarism. Oxford University Press, Oxford and New York.

    Kaldor summed this up well in a speech to the House of Lords regarding this little ‘blunder’ on the 16th April 1980. There he said:
    “Professor Friedman, as on some other WELL-KNOWN OCCASIONS, invented the facts to clinch the argument, and relied on his reputation as an expert for being taken on trust without anyone bothering to check the figures.”
    source: The UK Forum for Post Keynesian Economics
    Keynes Seminar in Cambridge
    Professor Richard Kahn on The Scourge of Monetarism (11 December 1987).

    Professor Paul Diesing a Economist.and Philosopher of Science that worked closely with Friedman at University of Chicago,points out in his valuable article ‘Hypothesis Testing and Data Interpretation: The Case of Milton Friedman,” Research in the History of Economic Thought and Methodology, vol. 3, pp. 61-69.: that Friedman “tests” hypotheses by methods that never allow their refutation.

    Diesing lists six “tactics” of adjustment employed by Friedman in connection with testing the permanent income (PI) hypothesis:
    1. If raw or adjusted data are consistent with PI, he reports them as confirmation of PI
    2. If the fit with expectations is moderate, he exaggerates the fit.
    3. If particular data points or groups differ from the predicted regression, he invents ad hoc explanations for the divergence.
    4. If a whole set of data disagree with predictions, adjust them until they do agree.
    5. If no plausible adjustment suggests itself, reject the data as unreliable.
    6. If data adjustment or rejection are not feasible, express puzzlement. ‘I have not been able to construct any plausible explanation for the discrepancy’…”

    In a proposed Op Ed column written in 1990, Elton Rayack (Not So Free To Choose, New York: Praeger, 1987) pointed out the interesting fact that while Friedman’s models did well in retrospective fitting to historic data, where the Friedman testing methods could be employed, they were abysmal in forecasts, where “adjustments” could not be made. Rayack reviewed eleven forecasts of price, interest rate, and output changes made by Friedman during the 1980s, as reported in the press. Only one of the eleven was on the mark, a not-so-great batting average of .092;
    “not enough to earn a plaque in baseball’s Hall of Fame, but evidently quite adequate to qualify [Friedman] as an economic guru.” The guru was, however, protected by the mainstream media; Rayack’s piece was rejected by both the New York Times and Wall Street Journal.

    We may conclude says Elton Rayak that Friedman’s truly pathbreaking innovation as an economist has been in the art of what is called “massaging the data” to arrive at preferred conclusions. This innovation has been extended further by other members of the Chicago School.”

    Professor Edward S. Herman writes further in Triumph of the Market, Boston: South End Press, 1995, p. 34-37 : about Milton Friedman:
    “Friedman was considered an extremist and something of a nut in the early postwar years. As Friedman has not changed, and is now comfortably ensconced at the conservative Hoover Institution, his rise to eminence (including receipt of a Nobel prize in economics), like that of the Dartmouth Review’s Dinesh D’Souza, testifies to a major change in the general intellectual-political climate.

    Friedman’s reputation as a professional economist rests on his monetarist ideas and historical studies, his analysis of inflation and the “natural rate of unemployment,” and his theory of the consumption – income relationship (the so-called “permanent-income” hypothesis). These are modest achievements at best. His monetarist forecasts have proven to be as wrong as forecasts can be, and the popularity of monetarism has ebbed in the wake of its failure.

    The Chicago School intellectual tradition traces back to University of Chicago professors Frank Knight and Henry Simon, who flourished in the 1920s and 1930s. These men were conservative, but principled and iconoclastic .
    These men were conservative, but principled and iconoclastic. Simon’s 1934 pamphlet, “A Positive Program for Laissez Faire,” actually called for nationalization of monopolies that were based on incontrovertible economies of scale, on the grounds of the evil of private monopoly and the inefficiency and corruptibility of regulation of monopoly.
    The post-World War II Chicago School, led by Milton Friedman and George Stigler, has been more political, right-wing, and intellectually opportunistic. On the monopoly issue, for example, in contrast with Simon’s 1932 position, the post-World War II School’s preoccupation was to dispute the importance and damaging effects of monopoly and to blame its existence on government policy.

    The postwar school is also linked to U.S. and IMF policies toward the Third World, in its pioneering service, through the “Chicago boys,” as advisers to the Pinochet regime of Chile from 1973 onward. This alliance points up the School’s notion of “freedom,” which has little or nothing to do with political or economic democracy, but is confined to a special kind of market freedom. As it accepts inequality of initial economic position, and the privilege and political influence built into corrupt states like Pinochet’s (or Reagan’s), its economic freedom is narrow and class-biased.

    The Chicago boys have always claimed that economic freedom is a necessary condition of political freedom, but their tolerance of political non-freedom and state terror in the interest of “economic freedom” makes their own priorities all too clear. The Chicago School’s attitude toward labor was displayed in the Chicago boys’ complacence over Pinochet’s use of state terror to crush the Chilean labor movement.

    The School’s general tolerance of monopoly on the producers’ side has never been paralleled by softness toward labor organization and “labor monopoly.”
    Henry Simon himself developed a pathological fear of labor power in his later years, as evidenced in a famous diatribe “Reflections on Syndicalism,” which may have contributed to his committing suicide in 1944.

    Subsequently, the labor specialists of the postwar Chicago School, most notably Albert Rees and H. Gregg Lewis, dedicated lifetimes to showing that wages were determined by marginal productivity and that labor unions’ pursuit of higher wages was futile. (Rees, however, did acknowledge the non-economic benefits of labor organization in his class lectures.)

    Chicago School analyses stressed the wage-employment tradeoff and the employment costs of wage increases based on bargaining power (as opposed to those negotiated individually and reflecting marginal productivity).

    They linked collective bargaining to inflation, viewing “excessive” wage increases as the pernicious engine of inflationary spirals. Milton Friedman’s concept of a “natural rate of unemployment” was a valuable tool in the arsenal of corporate and political warfare against trade unions-a mystical concept, unprovable, but putting the ultimate onus of price level increases on the exercise of labor bargaining power.

  4. I am a fan of Milton Friedman. I do give him credit for providing us with a definitive cure againts financial depressions. His 1963 book “A Monetary History of the United States” is the definitive book on the causes of the Great Depression of the 1930’s. He concluded with definitive statistics (that were not available to Keynes) that the US-FED froze, that they let too many banks collapse and with it the entire productive sector of the US-World economy by pursuing highly deflationary and protectionist policies.
    Friedman said that a small recession was unstoppable, but to convert that into the Great Depression that led to World War 2 was definately preventable had the FED used the instruments that were available to them. I.E, if they had done their job properly, none of that would have happened. And Friedman was right!.

    Briefly, Friedman’s argument was that back then the US Dollar was tied to the Gold Standard, and that England paid a substantial debt to the USA with Gold. So the US Gold reserves increased!! If the FED had monetaized those gold reserves and re-capitalize the banks, they would have had the room to forgive or delay by years most of the debts owned to them by the farmers, the small business and the big business as well. All that would have happened was that the US would have less gold, but they would have saved the economy in a few months and spared the World of Hitler’s rage. The FED did absolutely nothing.
    There has not been any more financial depressions after Friedman. The 1987 LTCM crisis that drop the Dow Jones was cured instantly with Friedmans recommendations. As were all the financial crisis after that, including Junk Bond, and the 2008-2009 crisis, The FED-following Friedman-re-capitalized the banks and everything was restored to equilibrium in all cases.
    Credit Milton Friedman with being the Alexander Fleming of Economics. They did not invent a cure for all remedy, but what he did invent cured financial depressions for good.
    Note: I am not a fan of Milton Friedman´s entire works or even his simplistic oulook on life-that is another story. But I do give him credit for this.

    • Why couldn’t Friedman put two and two together to realize that the Fed could fund (and protect the real purchasing power of, by indexing to inflation) the basic income he also supported?

    • And the GFC was what again due to other opinions by Friedman and his cohort. Plus I don’t think the largest wealth transfer upwards in modernity post facto a remedy to financial depressions.

    • Carlos,
      .
      “There has not been any more financial depressions after Friedman.”
      .
      I think you should have said that there has not been any financial depressions since Keynes. 🙂
      .
      ” If the FED had monetaized those gold reserves and re-capitalize the banks,…..”
      .
      I think the problem with the US banking system was that there were thousands of small independent banks that were in trouble – many of them suffering because of the farming crisis. Unlike the Canadian banking system which comprised of large money centre banks – Canada was not as severely touched by the financial crisis of the late 1920s and early 1930s.

      • 《the farming crisis》
        .
        Without further explication, is it very easy for scarcity-assuming economists to forget that Roosevelt’s problem was overproduction and falling prices? Farmers, contrary to mainstream predictions, supplied more and more even as demand fell, thus disproving supply and demand price theory? (Why didn’t Friedman notice this? Cognitive dissonance, perhaps?)

      • World farm product prices had been in downtrend for a decade by the early 1930s.

        There were also severe droughts in the US in the early 1930s which affected farm production.

      • From FDR’s second fireside chat https://www.presidency.ucsb.edu/documents/second-fireside-chat :
        .
        《The Farm Relief Bill seeks by the use of several methods, alone or together, to bring about an increased return to farmers for their major farm products, seeking at the same time to prevent in the days to come disastrous overproduction which so often in the past has kept farm commodity prices far below a reasonable return.》
        .
        《We found ourselves faced with more agricultural products than we could possibly consume ourselves and with surpluses which other Nations did not have the cash to buy from us except at prices ruinously low.》
        .
        《All of this has been caused in large part by a complete lack of planning and a complete failure to understand the danger signals that have been flying ever since the close of the World War. The people of this country have been erroneously encouraged to believe that they could keep on increasing the output of farm and factory indefinitely and that some magician would find ways and means for that increased output to be consumed with reasonable profit to the producer.》
        .
        《 I do not want the people to believe that because of unjustified optimism we can resume the ruinous practice of increasing our crop output and our factory output in the hope that a kind Providence will find buyers at high prices.》
        .
        《But, what good is such an agreement if the other 10 percent of cotton manufacturers pay starvation wages, require long hours, employ children in their mills and turn out burdensome surpluses》
        .
        Is citing the Dust Bowl as evidence of scarcity blatant cherry-picking?
        .
        https://www.govinfo.gov/content/pkg/GPO-CDOC-105sdoc24/html/ch4.html
        .
        《Food assistance programs also were aimed at diminishing the excess supply of farm products. The high unemployment levels of the Depression created the paradox of hunger side-by-side with the low prices and mounting surpluses of farm products.》
        .
        Wasn’t the supply curve for farmers opposite to what mainstream economists like Friedman assume?

        • ugh anyone remember Bergman

        • and yeah duh the US subsidy on grain to screw with the USSR …

      • Robert,
        .
        “The Farm Relief Bill seeks by the use of several methods, alone or together, to bring about an increased return to farmers for their major farm products, seeking at the same time to prevent in the days to come disastrous overproduction which so often in the past has kept farm commodity prices far below a reasonable return”
        .
        Keys words to note in quote:
        .
        “…in the days to come…”
        .
        and:
        .
        ” …which so often in the past…”
        .
        Which past is he referring to?

        .
        “In the 1930s, drought covered virtually the entire Plains for almost a decade (Warrick, 1980). The drought’s direct effect is most often remembered as agricultural. Many crops were damaged by deficient rainfall, high temperatures, and high winds, as well as insect infestations and dust storms that accompanied these conditions. The resulting agricultural depression contributed to the Great Depression’s bank closures, business losses, increased unemployment, and other physical and emotional hardships. Although records focus on other problems, the lack of precipitation would also have affected wildlife and plant life, and would have created water shortages for domestic needs.”
        .
        https://drought.unl.edu/dustbowl/Home.aspx

      • Henry, from your linked source:
        .
        《a record wheat crop in 1931 sent crop prices even lower. These lower prices meant that farmers needed to cultivate more acreage, including poorer farmlands, or change crop varieties to produce enough grain to meet their required equipment and farm payments.》
        .
        As prices dropped, supply increased. But doesn’t that contradict mainstream depictions of the supply curve?
        .
        See also https://en.m.wikipedia.org/wiki/History_of_agriculture_in_the_United_States
        .
        《In May 1933 the Agricultural Adjustment Act created the Agricultural Adjustment Administration (AAA). […]

        The aim of the AAA was to raise prices for commodities through artificial scarcity. The AAA used a system of “domestic allotments”, setting total output of corn, cotton, dairy products, hogs, rice, tobacco, and wheat. The farmers themselves had a voice in the process of using government to benefit their incomes. The AAA paid land owners subsidies for leaving some of their land idle with funds provided by a new tax on food processing. The goal was to force up farm prices to the point of “parity”, an index based on 1910–1914 prices. To meet 1933 goals, 10 million acres (40,000 km2) of growing cotton was plowed up, bountiful crops were left to rot, and six million piglets were killed and discarded.[60] The idea was the less produced, the higher the wholesale price and the higher income to the farmer. Farm incomes increased significantly in the first three years of the New Deal, as prices for commodities rose. Food prices remained well below 1929 levels.》
        .
        Once again, are you blatantly cherry-picking data to tell a mainstream story of scarcity, when actually the “farming crisis” you cited was due to overproduction and sinking (not rising, as Friedman predicts) supply curves?

      • Robert,
        .
        I think you have done your share of cherry picking.
        .
        I was making points about the impact of the collapse in farm prices and drought caused production declines on the progress of the Great Depression in the US in the early 1930s. These are facts.
        .
        This is not to say there might have been periods were a respite in drought conditions may have allowed for increased production. But the drought conditions were enough to break many farmers.
        .
        One of the main causes of in the secular decline in farm prices was the development of new machinery and methods which increased productivity and absolute production. (This was part of the general technological revolution evident in the 1910s and 1920s across many areas of industry – culminating in the Roaring 20s and the investment boom of the 1920s.)
        .
        These developments caused downward shifts in the supply curve.
        .
        I have no interest in your clamour against Friedman. You are just strawmanning again. That discussion you can have with someone who might be interested. 🙂
        .
        And your raising of Roosevelt programmes to shift agricultural production in the mid 1930s is also irrelevant to my point (see second paragraph).

        • Rsm’s time series of data, his econometric model and analysis is obscure.
          Has he identified a downward sloping supply curve as he claims? Identification of supply curves requires shifts in demand curves.
          It seems that rsm mistakenly attributes the expansion of US agricultural production during WW1 to lower prices after the war!!!!
          .
          As Henry notes there were major shifts in world supply and demand curves for agricultural products 1915-35.
          From Wikipedia’s account of the “History of agriculture in the United States” there was a big decline in European agricultural production during WW1 which led to a big increase in the world demand for US produce. The led to higher world prices and higher US production. This is entirely consistent with conventional theory of diminishing returns to scale and upward sloping supply curves.
          .
          Then during the 1920s European production resumed leading to lower world prices and reduced demand for US produce. Demand was further reduces by the world recession 1929-1935.
          The result was very painful contraction of US agriculture, again entirely consistent with conventional theory. This contraction was exacerbated by the dust bowl.
          According to Wikipedia “hundreds of thousands of farmers had taken out mortgages and loans to buy out their neighbors’ property, and now are unable to meet the financial burden. The cause was the collapse of land prices after the wartime bubble when farmers used high prices to buy up neighboring farms at high prices, saddling them with heavy debts”.
          .
          Thus the apparent “overproduction” and lower prices after WW1 were due to high prices and expansion during WW1, not due to downward sloping supply curves.

      • Henry and Kingsley,
        .
        See https://www.tandfonline.com/doi/abs/10.1080/00220387608421576?journalCode=fjds20 for a “test [of] the hypothesis that subsistence farmers are not responsive to economic opportunities and behave according to the notion of a backward‐bending supply curve […] The results indicate that farmers in the more subsistence‐oriented area behave according to the backward‐bending supply curve hypothesis, while the more commercialised farmers do not.”
        .
        So, do downward-sloping supply curves have some literature support?
        .
        Second, https://inflateyourmind.com/microeconomics/unit-6-microeconomics/section-7-the-farming-industry/ presents supply curves shifting; but can’t you more simply model farm production with one downward-sloping curve? What causes shifts? Why not use one simple downward-sloping curve, instead of two confusingly shifted up-sloping curves? Is Occam’s Razor on my side?
        .
        Have other studies supported this position as well, as documented in the following very interesting paper supporting negative supply elasticities? 《In Defense of Fence to Fence: Can the Backward Bending Supply Curve Exist?》Journal of Agricultural and Resource Economics, 17(2): 277-285
        Copyright 1992 Western Agricultural Economics Association
        .
        《While economists rarely make statements in print that admit violations of the law of
        supply, Galbraith and Black took this view for granted in trying to explain the high
        production levels that occurred during the Great Depression. 》
        .
        《Saez and Shumway found negative supply elasticities in the U.S. for four
        of ten regions for livestock, three of ten regions for feed grains, two of eight regions for
        food grains, two of seven regions for cotton, two of seven regions for oil crops, six of ten
        regions for vegetables, and three of three regions for tobacco. Negative supply elasticities
        have been found for dairy in Canada and wheat in Nigeria (Frohberg and Kromer). A
        U.S. Department of Agriculture (USDA) study found a negative supply elasticity for rice in Tanzania.》
        .
        So, have backwards-sloping agricultural supply curves been documented by very serious economists?
        .
        《John K. Galbraith and John D. Black [27] discussed the maintenance of agricultural output during the depression years in 1938. They argued, in accordance with classical economic theory, that fixed assets but not fixed costs contributed to continued high-level production during depression. They also asserted that agriculture is characterized by a long production period, limiting the ability of farmers to adjust output promptly or certainly to changing prices.》(from Estimating the aggregate U.S. agricultural supply function
        by Jeffrey Thomas LaFrance)
        .
        Is the US so big, that drought in the dust bowl did not cause agricultural production to decline throughout the 1930s? Couldn’t California, the South, the Pacific Northwest, etc. more than compensate?
        .
        Are you two getting more and more emotional as you vainly try to maintain a scarcity story about the Great Depression?
        .
        《In the 1930s, the economic, social, and political (the AAA played an impor-
        tant role in solidifying rural and southern support for the New Deal) rationale for a new approach to farm policy was clear […] the original AAA and subsequent farm legislation into the 1960s relied heavily on price
        supports and supply controls to increase returns to farmers.》(from United States
        Department of Agriculture Economic Research
        Service Carolyn Dimitri, Anne Effland,
        and Neilson Conklin, The 20th Century Transformation of U.S. Agriculture and Farm Policy)
        .
        Can we agree now that the “farm crisis” was one of overproduction, and government policy created artificial scarcity to support prices?
        .
        Didn’t farmers in the Dust Bowl move to fertile California, or they were shipped surplus food from other regions of the US, by the government, for free?

      • Robert,
        .
        “Are you two getting more and more emotional as you vainly try to maintain a scarcity story about the Great Depression?”
        .
        Please read what I have written.

      • Henry, didn’t you try to recast the Great Depression as a Malthusian collapse story, in accordance with mainstream economic predictions?
        .
        If not, can you clarify where you depart from the myth of food undersupply?
        .
        Is my story of a banking crisis brought on by artificial scarcity of liquidity more compelling than your cherry-picked, localized drought etiology?
        .
        I know you disapprove of my mentioning Friedman, but isn’t that what started the discussion?
        .
        Was Friedman correctly able to see that the Fed’s liquidity supply curve was unnecessarily constrained to rise during the Great Depression, thus creating the conditions for disastrous agricultural overproduction?
        .
        In other words if the Fed had a backwards-sloping supply function in the 1930s, there would have been no farm crisis, because production lost in the Dust Bowl was easily made up elsewhere?
        .
        Is the Fed currently demonstrating a backwards-sloping supply curve? More liquidity is supplied as rates drop? Is that economically irrational wrong-way supply curve what stopped the Great Recession from becoming another Depression?

      • Henry wrote:
        .
        《I think the problem with the US banking system was that there were thousands of small independent banks that were in trouble – many of them suffering because of the farming crisis.》
        .
        If the small independent banks were not calling in notes due to stock market crashes, would farmers have overproduced so much that they caused the Dust Bowl?
        .
        Did the banking crisis cause the farm crisis?


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