Anna Schwartz (the Schwartz of Friedman & Schwartz) came out against the actions of the Fed and Treasury. Since the current chairman of the Fed praised her analysis of the Fed’s culpability for the Great Depression, you’d think that would carry some weight. Tyler Cowen disagrees, because why would a smart guy like Bernanke take such actions if they weren’t TRULY necessary? Cowen admits that there is little direct evidence, but that isn’t decisive for him. I think he is placing far too much weight on one person as a black box. His reason #3 that we just can’t afford not to DO SOMETHING sounds in the outside view like all the wrong claims for drastic action taken in the past. I quote an old paper by one of his colleagues:
But one of the main lessons of the history of totalitarianism is that moderation and inaction are underrated. Few problems turned out to be as “intolerable” as they seemed to people at the time, and many “problems” were better than the alternative. Countries that “did nothing” about poverty during the twentieth century frequently became rich through gradual economic growth. Countries that waged “total war” on poverty frequently not only choked off economic growth, but starved.
A number of MR commenters make reference to a recent drive to DO SOMETHING we couldn’t afford not to, which Tyler admits he got wrong. Hopefully Anonymous made this comparison a little while back.
I’d like to hear Tyler’s response to Kling.
VERY LATE UPDATE: Scott Sumner indicts Schwartz for “neo-Austrianism” and accuses her of promoting a view her Monetary History attacked.