Thursday, July 14, 2011

One of the Worst Keynesian Forecasts Ever

Here is Keynesian Paul Samuelson in 1943:
When this war comes to an end, more than one out of every two workers will depend directly or indirectly upon military orders. We shall have some 10 million service men to throw on the labor market. We shall have to face a difficult reconversion period during which current goods cannot be produced and layoffs may be great. Nor will the technical necessity for reconversion necessarily generate much investment outlay in the critical period under discussion whatever its later potentialities. The final conclusion to be drawn from our experience at the end of the last war is inescapable–were the war to end suddenly within the next 6 months, were we again planning to wind up our war effort in the greatest haste, to demobilize our armed forces, to liquidate price controls, to shift from astronomical deficits to even the large deficits of the thirties–then there would be ushered in the greatest period of unemployment and industrial dislocation which any economy has ever faced.
From Paul Samuelson, “Full Employment after the War,” in S.E. Harris, ed., Postwar Economic Problems, 1943.
And now a quote from the The Economic Report of the President, page 1, issued by Harry Truman on January 8, 1947:
During 1946, civilian employment approached 58 million. This was the highest civilian employment this Nation has ever known— 10 million more than in 1940 and several million higher than the wartime peak. If we include the military services, total employment exceeded 60 million. Unemployment, on the other hand, remained low throughout the year. At the present time it is estimated at about 2 million actively seeking work. This is probably close to the mini- mum unavoidable in a free economy of great mobility such as ours.
Thus, at the end of 1946, less than a year and a half after VJ-day, more than 10 million demobilized veterans and other millions of war- time workers have found employment in the swiftest and most gigantic change-over that any nation has ever made from war to peace.

(HT to David Henderson via Cafe Hayek)

2 comments:

  1. Amazing how when capital allocation and labor movement is uninhibited how quickly the market cures itself.

    ReplyDelete
  2. What hubris and conceit to think that, at any time in history, we know more now and are smarter than those that came before. He should have read Bastiat.

    http://bastiat.org/en/twisatwins.html#disbanding_troops

    "A hundred thousand men, costing the tax-payers a hundred millions of money, live and bring to the purveyors as much as a hundred millions can supply. This is that which is seen.

    But, a hundred millions taken from the pockets of the tax-payers, cease to maintain these taxpayers and the purveyors, as far as a hundred minions reach. This is that which is not seen. Now make your calculations. Cast up, and tell me what profit there is for the masses?

    I will tell you where the loss lies; and to simplify it, instead of speaking of a hundred thousand men and a million of money, it shall be of one man, and a thousand francs."

    ReplyDelete