Mediocre Bernanke...

I just read another Bernanke paper. This one on the Great Depression, entitled "The Macroeconomics of the Great Depression" ... http://www.jstor.org/stable/2077848

This was only the 2nd Bernanke paper I've ever read, and like the first, it struck me as entirely mediocre. Bernanke argues that the proper approach to studying the Great Depression is to take an international, comparative approach. Sure, I agree, but isn't this rather, well, obvious? Bernanke dismisses Temin's critique of Friedman (who has seemingly been proved wrong by current events) by accusing Temin of "talking past" Friedman. The heart of Temin's critique, as i understand it, was that Friedman argued that the Great Depression was all about Money Supply by... assuming it was all caused by shifts in the money supply. I have not read all of Temin or Friedman, but at first glance it looks like Bernanke dismisses Temin (who I think is brilliant and have great respect for), much too easily.

Next, much of the paper has this sort of no-shit-sherlock, I'll-state-the-obvious and-present-it-as-deep-insight quality to it. It's as if Bernanke regresses deaths on gunshots to the head, and then reports that "gunshots to the head appear to significantly increase the liklihood of death, with a t-score of 2.6"... He doesn't go that far, but is anyone surprised that mass banking panics of 1931 would affect Macroeconomic variables in a statistically significant manner? This clearly falls into the category of something everyone knew who actually lived through it... and it also falls into the category, apparently, of novel academic economic research published in a top-flight, peer-reviewed journal.

One main point of the paper, that countries who went off the gold standard earlier did better, is of course accurate. Certainly, i believe that going off gold was the correct policy response, and should have had a positive effect, and in fact did help. Yet, Bernanke screws up when he writes that the potential endogeneity should bias the impact of leaving gold negatively rather than positively, as the worst-hit countries would also have the most incentive to leave gold. It seems to me, in at least the US case, that quite the opposite is true: the US didn't go off gold until after FDR was sworn in (despite being hit the worst), after which all economic policy changed dramatically -- there was an increase in government spending (which bernanke inexplicably ignores and, indeed, appears ignorant of), FDR's banking holiday & guarantee of bank deposits, and all the other New Deal programs... In other words, going off of gold was a proxy for a reverse course in economic policy generally. Staying on gold was a proxy for having economic policymakers that didn't have any idea what they were doing. How Bernanke cannot see this is an absolute mystery.

On the whole, the paper reads like a graduate student's term-paper they wrote over a long weekend in order to sneak in for the deadline, not an academic, scholarly work. One thing I worry about with economics is that, since the peer-review process is not anonymous, once top authors have established reputations, they can publish virtually every paper they write. So, then their incentive is to produce tons of papers very quickly, as they are still assured of publishing their work in good journals. The downside is that their work often feels incomplete, misses the point, and smacks of being written over a weekend, all of which is pretty much a necessity if you are to have an output of 7-8 papers a year on top of teaching and journal editing...

Yet now this guy is in charge of our nation's monetary policy, so it does kind of suck that his analysis of the Great Depression was something short of spot-on...