Sunday, September 26, 2010

Why does Paul Krugman hate Manx statisticians?

Prof. Krugman has one of those it-was-always-thus teaser quote posts --

Who said this? More important, when did he say it? --

".... I believe this present labor supply of ours is peculiarly unadaptable and untrained. It cannot respond to the opportunities which industry may offer ..."

It's from a 1935 paper, leading Krugman to note -- 

That’s right: in the depths of the Great Depression, wise heads proclaimed the problem one of structural unemployment, which obviously could not be cured just by increasing demand.

Yet having opened with the Who said this question, he doesn't tell us who said it.  It was a man named Ewan Clague.  Clague was a statistician -- not an economist.  Here's his 1987 New York Times obit.  He was a Pacific Northwester of Isle of Man ancestry.  Before being a tax haven, there wasn't a whole lot to do in the Isle of Man.

Anyway, Ewan Clague was hardly a 1930s Tea Partier arguing against more stimulus to reduce unemployment.  As a statistician, he wanted to have more, er, statistics, so that the problem of unemployment could be properly studied.  And, as the quote suggests, he had a specific interest in understanding unemployment due to technological change, an issue which had been a concern even in the 1920s.  This was an era of massive change in industrial technology with understandable anxiety about how it would affect workers.  So he's an odd choice as a limb on the Austrian economics pinata.

Furthermore, when via The Google one tracks down some off-the-cuff memoirs he provided to the Harry Truman library, it's fascinating stuff.  The section about the planning for the post World War II economy is interesting.  Basically lots of people thought that the US economy would crash after the war because it had become so used to wartime demand that it would take years to get back on an even keel.  Yet contrary to his pessimism of the 1930s, Clague was convinced by the work of Vladimir Woytinsky (another man worth a little time to follow up) that the adjustment could be managed relatively easily and that the government was focused on the wrong problem: recession when they needed to worry about falling wages and inflation.

So yes, there are some quotes from back then that can be placed in strange contexts today.  But a little context from then is better than no context at all.

UPDATE: There's a related quote in today's Krugman column.

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