George Selgin: evaluation

Transcript context

…Why? Because the theory behind it, first of all, wasn’t very sound. The idea was that we’re going to tax food processors and do that to raise the income of farmers, really of farm owners, and that the farm owners will have a higher — I’m now using language that wasn’t current at the time — will have a higher marginal propensity to consume than the people being taxed, and therefore, there’ll be more spending overall. It was a rather doubtful theory to begin with. Of course, what these farmers were being paid to do was to produce less output, to farm fewer crops, and to destroy crops and livestock, with the aim of raising their prices through supply reduction and not just by getting aggregate demand to grow. So, you had this feeble aggregate demand component, which just wasn’t effective enough to matter, and then you had this adverse aggregate supply effect, which was important, but wasn’t doing something desirable. The studies of the AAA’s effect on recovery overall don’t show any. It’s quite controversial whether it had a small effect or none at all. I think it probably had none. Here’s a tricky one: Banking Act of 1933.…

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