Or Claudius or Gertrude for that matter.

So an evil liberal librarian has provided Wonks Anonymous with a copy of the paper by Cole and O'Hanion that proves that the New Deal prolonged the Great Depression and he read the thing so that you, dear readers, do not have to.

It is a nice theoretical exercise demonstrating that the authors have mastered all of the tricks of modern mathematical economics, including game theory and general equilibrium modeling. Alas the authors seem to have forgotten something in their rush to model insider - outsider bargaining in union labor markets.

In this model nobody borrows or lends. All capital is real and households rent it to firms for real payments. Households do not borrow which would produce an obligation to make a steady stream of money payments. Neither do they lend which would make their wealth dependent on the ability of borrowers to make these same payments.

At the same time the value of any real assets that they might hold is independent of inflation/deflation.

Prices rise, prices fall, nobody loses anything. therefore the best solution to any problem is to kick out the jams and let the market work its magic.

And it turns out that prices would have had to fall a lot. Since Cole and O'Hanion are just a bit coy about this, Wonks Anonymous has computed the actual deflation for the period using price series provided by the St Louis Fed.

First, during the days of unfettered market magic - for our authors that would be from the fall of 1929 to the start of 1933 - the St Louis Fed index dropped from 17.3 to 12.9. That would be a 25% deflation. From the passage of the New Deal to 1939, when our authors stop their study, the index rises from 12.9 to 14. That would be an 8% increase over six years. That would be well within the current Fed inflation targets.

Overall in the decade from 1929 to 1939 prices fell by 20% but, per Cole and O'Hanion, this was not enough. Perhaps if we had allowed the market to act freely further deflation would have brought about recovery.

Maybe 30% deflation would have been enough.

Now Wonks Anonymous is curious about what goes on in the minds of economists from the swamps of Chicago. These folks are exquisitely sensitive to the distortions that can be produced by even a 10% rise in prices. Too much borrowing and low real interest rates kill off capital markets, people hoard goods against an increase in prices, inflationary expectations form and so on

Meanwhile they imagine that a 25% or 30% drop in prices over a decade can be negotiated with no disruptions to asset and credit markets. No need to be concerned with anything except labor markets here folks. It was those bad workers after all.