9 - The economists and their views on policy for 1932

Summary

Hoover had reoriented his campaign against depression in late 1931. The final goal remained the same: revitalization of the economy through the recovery of spending. But new circumstances had dictated a shift in the policy mix. The environment that provoked reassessments in official quarters might also have been expected to inspire new thinking among the economists. Certainly the course of events had diverged substantially from the expectations of both the more orthodox neoclassicists and the champions of stabilization strategies of the new era. Members of the former school had typically held that the economy's natural mechanisms should have produced some evidence of an upturn by early 1932 – but that had not happened. Those of the latter persuasion were also disappointed. Their hopes that the deployment of the first official model would dampen and shorten a downturn had been dashed. None of them, however, had given systematic thought before the fact to the possibility that the institutional fabric of the financial system might reach the state it did in late 1931. The viability of this crucial component of a modern economic system had been accepted as a given when the original prognoses on the course of depression had been offered.

While groping for new intellectual moorings, Hoover himself did not significantly widen the small circle of academic economists with whom he conferred. He was, however, the recipient of a lot of unsolicited advice from members of the academy.