Wartime Prosperity Revisited

Steven Horwitz

Some of our long-time regulars may remember this post from February 2011 where I talked about a paper one of my students was working on looking at primary source material as evidence for Bob Higgs's argument that World War II did not get us out of the Great Depression.  Bob argues that wartime macroeconmic data is highly misleading for a variety of reasons, including price controls, and that if we correct the aggregates, we see a much less rosy picture of the war's effect on the American economy.

Mike McPhillips and I have now completed the paper that I hinted at in that post and I found out today that it was accepted for publication in The Independent Review, in the Winter 2013 issue.  It is titled "The Reality of the Wartime Economy:   More Historical Evidence on Whether World War Il Ended the Great Depression."  I have posted a copy to SSRN, which can be found here.  Mike did terrific work on this and I'm happy to see it published somewhere that will get read by more than just professional economists.

Comments

[Jerry O'Driscoll]

It is laughable that economists could have bought into the idea of war-time prosperity. What is produced in war is not fit for human consumption. What is fit for human consumption is diverted to troops fighting the war.

[J Oxman]

Steve,

That is a nice paper you and Mr. McPhillips wrote. It reminded a lot of my parents, who were raised during the war (both born in '34). It's the kind of experience that stays with you. My parents taught us kids all about canning & preserving, gardening, hemming & patching clothes - the lot! You'll notice, too, people of that era are compulsive hoarders. Not a damn rusty screw is thrown away.

[Chest Zeppelin]

What? No Daniel Kuehn and his usual equivocations? I thought for sure he'd be the first one here.

[Daniel Kuehn]

Chest -
I don't do equivocations. There's not much to disagree about the fact that consumption was suppressed during the Great Depression. Did you expect anyone at all to challenge that?

The contribution to output and employment recovery is obvious and undeniable (DeLong, Summers, Romer, Vernon, and that whole literature has argued about what percentage of the recovery was due to the war spending exactly). The fact that it did not come in the form of improved consumption seems equally obvious and undeniable.

If you want to just decide that it doesn't count if its not private investment and consumption, who can really challenge you on that. It seems like a very odd judgement call to me, but you're welcome to decide you don't care about it. But as far as the facts of the case I think people are reasonably agreed on what's going on.

We've always had the national income figures - what's neat about this paper, of course, is that it provides some cultural context to all that.