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The Economics of the Recovery Program
Published online by Cambridge University Press: 02 September 2013
Extract
From Aristotle's day to this, the subject-matter of economics has been recognized by political scientists to affect very greatly the institutions with which the latter deal. In our own time, studies like those of Professors Charles A. Beard and Arthur N. Holcombe have carried the great bulk of American political scientists over to a primarily economic interpretation of political history. It is not too much to say that there has been some danger of political scientists conceding too much common ground to the economist's psychology and methods.
The economist, on the other hand, has for some decades at least, both in this country and abroad, had scant patience with political science. He has given even less recognition to the bearing of political factors upon the simple assumptions upon which his economic science too often rested. F. Delaisi characteristically wrote of Political Myths and Economic Realities, without much regard for a test of whether the myths might not be the more powerful realities in terms of survival value. “Politics” was something which, in an annoying and “unscientific” way, occasionally interfered with the operations of man as a profit-making animal. Politics was rarely thought of as a statement of those psychological motives and controlling social institutions which corrected or conditioned at every stage the jejune motivation and the mechanical equations upon which most economic generalizations rested.
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- Copyright © American Political Science Association 1934
References
1 The Economics of the Recovery Program, or as the publisher's jacket chose to call it: “a candid and vigorous discussion of the New Deal by seven Harvard economists.” The names of Professors Taussig, Gay, Bullock, Burbank, Monroe, Usher, and others were absent, and a group of half a dozen tutors chose to differ by sending a joint letter to the President assuring him of their support of his program, particularly of his monetary policy.
2 This is the main burden of Leonard P. Ayres' criticisms. The opposite economic theory has as its most cogent expositor John A. Hobson, especially in his Work and Wealth.
3 A quotation from Cicero (De Republica) may serve to show the antiquity and the universality of this problem: “Our ancestors had perhaps a plan for the relief of debtors similar to the plan which had occurred to Solon of Athens a short time before, and which at a later date suggested itself to our own Senate. … It was always the practice in such emergencies, when the common people were suffering from a public misfortune, to seek some remedy and alleviation in the interests of the public safety.”
4 This debt was alleged by economists to have reached colossal proportions, variously estimated at somewhere between 160 and 200 billion dollars.
5 Those who allege that, regardless of its effect on our own price level, we should have accepted the new sterling level of something around $3.50 in terms of gold dollars, sometimes argue that the old parities of 1929 represented an overvalued sterling in the light of trade balances. But it may be that both sterling and dollar in 1931 were overvalued for purchasing power and required a new orientation toward gold that would stop the contraction of world credit. If domestic prices in the United States respond to the new gold content of the dollar, the old parity with sterling, or something like it, may be resumed without too much difficulty for either country.
6 These powers included not only the right of the Treasury to issue securities to a value of three billion dollars, to be taken up by the Federal Reserve system, but also the discretionary right to alter the weight of the gold content of the dollar to as little as fifty per cent of its former amount. A further power to issue three billion dollars of “greenbacks” was qualified by the limitation that this might be done only for the purpose of redeeming government securities.
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