Evening Must-Read: Paul Krugman: Soup Kitchens Caused the Great Depression, Austrian Founding Fathers Edition

Paul Krugman: Soup Kitchens Caused the Great Depression, AFF Edition:

The blog Social Democracy for the 21st Century has a fascinating post about Austrian patron saint Ludwig von Mises in the Great Depression… it bears so much resemblance to current right-wing flailing… von Mises, faced with the reality of depression, basically dropped Austrian business cycle theory, and for the very reason people like me have always had trouble taking it seriously…. ABCT is essentially a story about the excesses of the boom; it offers no clear or plausible story about how that boom leads to a sustained slump. And von Mises was in effect already conceding that point by 1931…. According to vM, it was excessive wages… and unemployment benefits were leaving workers insufficiently desperate. Sound familiar? It should–it is, essentially, the current Republican story, in which unemployment is high because we’re being too nice to the unemployed–that, as I like to say, soup kitchens caused the Great Depression…. It’s a nonsense story. But it turns out that it’s always the story the right turns to when market economies go bad–because the alternative would be to admit that market economies can in fact go bad, and that sometimes government is the solution, not the problem.