QotD: Lessons from the Great Depression

The relevance for today is simple. The famous "multiplier effect" of public spending may exist. U.S. cities do indeed need new highways, new buildings, and new roads, maybe even from the government. There may also be a spillover effect, as historian Alexander Field has noted. When the government builds a road, it is easier for the trucker to get from one point to another, and the trucker makes higher profits. These merits should be weighed against damage that comes when officials create projects and jobs for political reasons.

An emergency such as a Great Depression can serve as a catalyst for job creation. But the dire moral quality of that emergency does not guarantee that a project undertaken in its name will be more efficient than your standard earmark. In fact, infrastructure spending is often just a nicer name for what we used to call pork. Given the depth of modern capital markets, the New Deal's old argument that "only the government can afford this" looks particularly weak. The New Deal edifice is solid enough, but it doesn't form the best basis for the national future.

Amity Shlaes, "Afterword to the paperback edition", The Forgotten Man: A New History of the Great Depression, 2007, 2008