In contrast to the bawdy lifestyles of Keynes and Schumpeter, America’s leading economist, Yale University’s Irving Fisher, was equally active, according to Nasar. Fisher was a serious academic whose theories about interest rates are still viewed as illuminating today. But as might be expected of an American, Fisher’s outside energies were focused on building his small business, cheering on the stock market, rooting particularly hard for his Remington Rand shares and options, and trying to impress his wealthy in-laws. Sadly, Fisher will be remembered mostly for his famous prediction two weeks before the October 1929 stock market crash that “stocks had reached a permanently high plateau.”
It would be easy for an American chauvinist to note that these are just a few more examples of why Americans were well-meaning, albeit naïve, industrious people, while Europeans were decadent dilettantes long ago. But it is too easy a takeaway. After all, America, founded by puritans who allegedly carried more beer than water on the Mayflower, enacted prohibition in 1919, opening the door to organized crime, while failing to prevent brilliant young talents like F. Scott Fitzgerald from drowning themselves in alcohol.
Both Europe and America tried their hardest to spend the 1920s blotting World War I out of their consciences. Europe, in particular, lost a generation of young men. Germany suffered total casualties of 2.46 million people, or 3.8% of its population; France lost 1.7 million, or 4.3% of the population; and the United Kingdom saw its population thinned by just under 1 million, or 2.2%. Think that’s bad? The Ottoman Empire lost 2.9 million, or 13% of its population, while Serbia suffered 725,000, or 16.1%.
Australia and Canada, tiny countries at the time, each lost over 60,000 people, more than America lost in Vietnam. And we are still living with the legacy of that war today.
All this is to say that if the libertine Mad Men/Rat Pack lifestyles of Keynes, Schumpeter and millions of others on both sides of the Atlantic were hardly a model of rectitude, it was understandable. Given the magnitude of economic crises like famine and depression they were confronted with, it’s understandable that they questioned if civilization would ever see “the long run.” Robert Skidelsky, Keynes' biographer, recently wrote in The Washington Post, that the economist stressed the short term because his times were characterized by ubiquitous pain almost all the time. Contrast that with the long term which was so uncertain and it's easy to see where he chose to focus. Ironically, who knew then that the 20th Century would usher in the most dramatic changes in life expectancies of the millennium.
Today, it’s fashionable to criticize the spoiled, drug-crazed flower children of the 1960s—criticism with much justification. But if 10-year-olds are told every week in the 1950s to conduct a preposterous drill of sticking their heads in their lockers to save themselves in the event of a thermonuclear missile attack, it shouldn’t be surprising that they behave recklessly with little regard for their health once they are on their own.
Nasar’s book provides a distant mirror to today’s economic predicaments. By the 1930s, leading economists were behaving like ship captains sailing in a convoy during an interminable hurricane, each shouting ideas and observations back and forth about how to escape the storm. However, in contrast to today’s puerile and petulant debates over austerity versus stimulus, the participants in the 1920s and 1930s genuinely cared as much about the suffering of the population as the validity of their own ideas. Things were a whole lot worse then and egos were smaller.
I know virtually nothing about the personal lives of the two leading economists of the post-World War II era, Paul Samuelson and Milton Friedman. But I do know they disagreed on many topics, yet were good friends. Given that they lived into their 90s and were both extremely lucid, it’s hard to imagine they were party animals. After all, there was only one Winston Churchill. It’s also hard to imagine Greatest Generation economists Samuelson and Friedman behaving in the mud-slinging fashion of folks like Ferguson, or for that matter Paul Krugman.
We never got around to discussing the flaws in Keynesian economics, but I’ll leave you with one. He predicted that by this time in history society would become so wealthy that the majority of individuals could work part-time and live a life of leisure. Ooops. I doubt that resonates with millions of unemployed in Europe or those in America struggling to get by on a couple of part-time jobs.
A final note: We, as ordinary citizens, have the same right to demand information from academics as we do from politicans, even if they choose to ignore us. So when I heard the University of Massachussetts professor who supervised the student who exposed the errors in Harvard professors Rogoff and Reinhart detail one particular error, i feel compelled to join the chorus. In particular, Rogoff and Reinhart, measuring the impact of government debt on GDP growth, assigned the same weight to one year for one nation, 1951 for New Zealand, when it suffered a near-depression, as they did to 19 years of U.K. data, when the British Isles experienced 2.5% GDP growth despite heavy government debt.
If Rogoff and Reinhart refuse to answer the U Mass professor, it's obvious they won't answer me. Fine. They can keep saying coding errors and arbitrary weightings that would appear to tilt their results to favor a particular conclusion are insignificant. But they shouldn't expect people to keep believing them.