George Selgin on the New Deal, Regime Uncertainty, and What Really Ended the Great Depression - Conversations with Tyler Recap

Podcast: Conversations with Tyler

Published: 2025-10-15

Duration: 1 hr 9 min

Summary

George Selgin discusses the New Deal's impacts on the economy, arguing that while some measures provided temporary recovery, they ultimately failed to stimulate sustained growth. He emphasizes the importance of understanding what the New Deal did not accomplish, particularly regarding modern economic stimulus.

What Happened

In this episode, Tyler Cowen welcomes George Selgin to discuss his new book, "False Dawn: The New Deal and the Promise of Recovery, 1933 to 1947." Selgin critiques the commonly held belief that revaluing gold was the primary driver of economic recovery during the New Deal, asserting that the New Deal itself did not constitute a modern-style economic stimulus program. He emphasizes that the initial recovery was significantly aided by external factors, particularly gold inflows from Europe, which were largely unintentional.

Selgin elaborates on various New Deal policies through a rapid-fire format, assessing their effectiveness. For instance, he argues that the Glass-Steagall Act was irrelevant to recovery, as the involvement of commercial banks in investment banking was not a contributing factor to the Depression. Furthermore, he critiques the Agricultural Adjustment Act, labeling it as bad policy due to its ineffective theory and adverse supply effects. Selgin illustrates that while some initiatives had limited success, overall, the New Deal did not achieve its intended economic revitalization.

Key Insights

Key Questions Answered

What were the main critiques of the New Deal by George Selgin?

George Selgin critiques the New Deal by emphasizing that it did not constitute a modern-style economic stimulus program. He argues that while some early measures led to a brief recovery, the long-term impacts were negligible and overshadowed by what the New Deal failed to achieve. Selgin asserts that the initial economic activity was largely due to external gold inflows rather than effective domestic policies.

How did revaluing gold impact the economy during the Great Depression?

Selgin points out that revaluing gold initially resulted in a manufacturing output growth rate of 7% to 8%. However, this growth was not sustainable, as it was fueled by the anticipation of price controls from the National Recovery Administration. Once the initial boom subsided, the underlying issues within the economy remained unaddressed, leading to a lack of continued growth.

What was the effectiveness of the Glass-Steagall Act of 1932?

Selgin describes the Glass-Steagall Act as largely irrelevant for economic recovery. He notes that the separation of investment and commercial banking was not a factor that contributed to the Depression, and therefore, its repeal would not help in resolving the economic crisis. He emphasizes that the act's impact was minimal in the broader context of recovery efforts.

What were Selgin's views on the Agricultural Adjustment Act?

Selgin critiques the Agricultural Adjustment Act as a poor policy decision, arguing that its underlying theory was flawed. The act aimed to raise farmers' incomes by taxing food processors and paying farmers to reduce output. He points out that this method was ineffective in stimulating aggregate demand and had adverse supply effects, which further muddled its potential benefits.

How did Keynes influence Roosevelt's economic policies during the Depression?

Selgin argues that the myth surrounding Roosevelt's adherence to Keynesian principles is misleading. He states that Keynes actually criticized Roosevelt for not following sound economic advice, particularly regarding the devaluation of the dollar. Selgin believes that had Roosevelt heeded Keynes' recommendations, the response to the Depression may have been more effective.