Lesson 4 of 6
Analysis and advocacy in one book
America's Great Depression holds careful monetary history and a policy programme in imperatives. Telling them apart while reading is a skill.
By Javier Sanz
Founder of ValueScreener. Built Ninety Nine, a securities services provider, and sold it to a tier-one global bank; ran operations and internationalization at Alpaca, the brokerage API.
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In one minute
- The book has three parts and they are different kinds of writing: theory, monetary history with a great deal of data, and a policy narrative.
- The theory part contains its own section on problems in the theory, which is a good sign in any book and is where a critical reader should start.
- The author states plainly, in a footnote, that advocating a policy rests on ethical principles the book does not discuss. That is the join between the two kinds of writing, marked by the author himself.
Rothbard's America's Great Depression is the book most readers of this tradition meet after the primary sources, and it is the best place to practise the separation this course is about.
The three parts, and what kind of writing each is
What the parts contain
- Part one: the theory of the cycle, the Keynesian criticisms of it, and other explanations of depression.
- Part two: the monetary history of 1921 to 1929, with money supply, reserves, discounts and acceptances.
- Part three: the depression years and government policy.
How to read each
- Part one as argument: check the steps, and read its own section on problems in the theory.
- Part two as evidence: check the definitions, the series and the dates, which are stated.
- Part three as interpretation and as advocacy, which the author separates from the analysis himself.
A reader who treats all three parts the same way will either accept too much or dismiss too much.
Where the analysis is
Part two is the part of the book least often discussed and the most checkable. It sets out a definition of the money supply, then measures its inflation from 1921 to 1929, and works through the sources of that expansion: reserve requirements, total reserves, treasury currency, bills discounted, acceptances and government securities.
A reader can disagree with every conclusion in the book and still use that chapter, because the definitions are stated and the series are named. That is what makes it analysis: it can be checked, and someone who disagrees knows what they are disagreeing with.
Part one is argument rather than evidence, and it contains a section on problems in the Austrian theory of the trade cycle. A theoretical chapter that names its own difficulties is doing something a defensive chapter never does.
Where the advocacy is
The theory chapter turns, at a specific point, from describing a process to telling a government what to do. The section on depression policy is a list of instructions in imperative form: do not interfere with the adjustment, do not lend to shaky businesses, do not inflate further, do not hold wage rates up.
The book marks the join itself. A footnote to that section states that advocacy of any government policy must rest, in the final analysis, on a system of ethical principles, and that the book does not attempt to discuss ethics. That is the author telling the reader that the argument has changed kind, and it is more than most books of any tradition do.
The same section also characterises those who would disagree in terms of their motives. Notice the move when it happens: an argument that explains your disagreement by your interests has stopped being an argument you can answer with evidence.
What this is not
It is not a reason to dismiss the book, and it is not peculiar to this author. The previous lesson found the same pattern in an editor's introduction to Hayek, and a reader will find it in mainstream writing on policy just as often.
Nor is it a reason to treat the popular version as the considered one. A critic in the second course of this track took a short pamphlet as the canonical statement of the theory, and the reply he received was that the pamphlet was a popular exposition and that the advanced treatments say more. Both points are fair, and together they are the argument for reading the book rather than the summary.
Check yourself
Which part of the book is the most checkable?
- The theory chapter
- The monetary history of 1921 to 1929, with its stated definitions and named series
- The chapters on government policy
Show the answer
Answer: B.
Definitions and series are what make a claim checkable, and that part states both, whatever a reader concludes about the interpretation.What does the footnote in the policy section concede?
- That the data are incomplete
- That advocating a government policy rests on ethical principles the book does not discuss
- That the theory has been refuted
Show the answer
Answer: B.
It is the author marking the join between analysis and advocacy, which is why the lesson uses this book rather than a less careful one.What is the warning sign inside an argument?
- The use of statistics
- An explanation of your disagreement in terms of your motives rather than your reasons
- A long list of sources
Show the answer
Answer: B.
Once disagreement is attributed to interests, there is nothing left for evidence to settle, and that move appears in every tradition.Sources
- Rothbard, America's Great Depression, first published in 1963, fifth edition published by the Ludwig von Mises Institute in 2000: part one, chapter one, including the sections on the cluster of error, on government depression policy, on preventing depressions, and on problems in the Austrian theory of the trade cycle, together with the footnote stating that advocacy of a government policy rests on ethical principles the book does not discuss; part two, chapters four and five, on the definition of the money supply and the sources of monetary expansion from 1921 to 1929; and part three on the depression years.
- Tullock, 'Why the Austrians Are Wrong About Depressions', Review of Austrian Economics, volume two, 1987, and Salerno's comment in volume three, for the exchange about whether a popular pamphlet is a fair statement of the theory.
What this leaves out
- This is a heterodox tradition. The mainstream account of the same phenomenon differs, and nothing here is a forecast or a view on any security.
- Nothing here evaluates the book's account of the 1920s or of the depression. This lesson is about how to read it, and the historical claims are outside what is assessed.
- The policy passages are described so a reader can recognise the change of register. Describing them is not endorsing or opposing them, and this track takes no policy position.