[As an analogy, it’s awkward for intellectuals on the center left to watch large numbers of working class Americans moving each year from blue states to places like Texas and Florida. Indeed, this fact explains their sudden interest in zoning reform, which is (ironically) a longstanding cause for libertarians like me.]
That’s not to say that the US might not have been better off with more welfare spending in the 19th century, just that it’s not an obvious example of the failure of extreme libertarianism. Indeed, I’d go even further. At the (cross sectional) level, I don’t believe world history offers any obvious examples of the failure of libertarian ideology. Not one. If I am wrong, which country is the failed libertarian model?
On the other hand, from a time series perspective there are some seemingly obvious examples of libertarian excess, including the Great Depression of the 1930s and the more recent Great Recession that followed the 2008 banking crisis. While those events certainly look like failures of libertarian ideology, on closer inspection they are both examples of the failure of government monetary policy. Nonetheless, here I believe DeLong is partly correct, as while I see these events as representing government policy failure, I accept DeLong’s view that they largely reflect government policy failures caused by ideas popular among many libertarians, such as opposition to stimulus when NGDP has fallen. So I certainly don’t wish to suggest that our hands are clean. Libertarians are like anyone else; they often hold incorrect and even morally objectionable views.
[BTW, throughout the book DeLong sprinkles in a few embarrassing quotes from libertarians like George Stigler and Friedrich Hayek. In contrast, one finds almost no examples of embarrassing quotes from intellectuals on the center-left, even though if you go back in history you can find plenty of such examples on issues ranging from race to gay rights. Whole books have been written documenting the left’s embarrassing excuse making regarding communist regimes.]
DeLong views Herbert Hoover as an example of how laissez-faire ideology can lead to disaster. The truth is more complicated. At the time, Hoover was regarded as being much more interventionist than Coolidge. DeLong correctly lists some of Hoover’s mistakes, but only those that would be viewed as mistakes by a center-left economist. Thus Hoover favored high tariffs and opposed devaluing the dollar. But DeLong doesn’t discuss the many (ineffective) actions that Hoover took to ameliorate the Depression. Nor does he discuss Hoover’s decision to dramatically raise income taxes on the rich (from 25% to 63%), or his success in jawboning corporations to avoid the sort of deep nominal wage cuts that allowed for a fast recovery from the 1921 deflation. That’s not laissez-faire. I’m not one of those libertarians that believe these policy errors caused the Great Depression—tight money was the main problem—but these mistakes made it somewhat worse. (As did FDR’s NIRA wage shock.) I suspect that most center-left economists support higher taxes on the rich and oppose nominal wage cuts in a depression, so perhaps this explains DeLong’s oversight.
But given what we know now, the cause of the Great Depression was clearly government failure.