An example of classical economics in the real world


There is an article in The Oz on who used to be my favourite American president but is now only my second-favourite – Warren G. Harding. As the article points out, although he was president for only 29 months, he is regularly listed among the worst presidents in American history by that motley crew of academic historians (and economists) who have no idea about which direction is up. They would almost all have voted for Joe Biden so you can see how sound their judgment must be.

The title of the book under review is The Jazz Age President: Defending Warren G. Harding. Alas, I only have the review to find out what the author wrote, but this is the bit that I wish to focus on:

Harding’s first priority was the economy – gross national product was down 17 per cent, stock values were cut nearly in half, unemployment was over 12 per cent, and farmers were devastated by plunging prices.

This was the economy Harding inherited on becoming President. You hardly need to guess what a modern political leader would do, and be expected to do, if these were the circumstances they had to deal with. Anyway, he did precisely what no one would do today – the article continues:

Harding reduced government spending, slashed individual taxes (the marginal rate had reached a high of 77 per cent), increased tariff rates, and reduced the intrusiveness of the federal government.

The result was what is today recalled as The Roaring Twenties.

What is even more astonishing is that you can no longer find an economics text that will explain why such policies deliver the outcomes they always do, other than, of course, my own Free Market Economics. And then there is this if you would like more detail on the entire history and framework of an economic theory that provides wealth and prosperity: Classical Economic Theory and the Modern Economy.

Donald Trump did the same to the American economy but you will hardly ever find a good word about any of it virtually across the entire media and certainly not from within the academic world of economics.

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