Designs Within Disorder: Franklin D. Roosevelt, the Economists, and the Shaping of American Economic Policy, 1933-1945.

By William J. Barber.

Cambridge, UK: Cambridge University Press, 1996. Pp. ix, 178. $44.95.

This most interesting, enjoyable book continues William Barber's exploration into the role of economists as they tried to and did influence policy during the Hoover and Roosevelt years. His earlier study, From New Era to New Deal, concentrating on the Hoover administration - takes events to 1933. The present essay continues the story. The subtitle captures the book's purview, the title its thesis.

With Roosevelt coming on the scene in March 1933 - the Depression's trough - the emphasis was on recovery measures. The principal design that emerged out of the plethora of recovery proposals was a home-grown deficit-finance version of 45 degree Keynesianism, with the deficit the policy instrument with which "gaps" - deflationary and inflationary - were to be dealt. This Barber christens as the "official model," one in which there is no place for monetary considerations, much to Fisher's chagrin. The Washington economists, and here Currie as intellectual light and empirical resource and Eccles as pivotal policy advocate are among the most influential, intuited an aggregate demand framework for policy, "an American version of Keynesian doctrine," (p. 128) which later adopted the formal trappings of Keynes as undergirding for their intuition. As for his personal influence, the December 1933 and June 1935 Open Letters to the President and his mid-1934 personal meeting with Roosevelt, Keynes had no impact: he "impressed the president as 'a mathematician rather than a political economist'" (pp. 83-84), one of a number of digs at economists Barber records.

The Americanized macroeconomic approach to recovery came only after the administration's preferred and first all-out recovery policy - the National Industrial Recovery Act (NIRA) planning experiment emanating from Roosevelt's Brains Trust and its National Recovery Administration (NRA) inspired price codes, in which "concentration and control" replace "competition and conflict" - foundered as Tugwell and his structuralist theoreticians increasingly found the rhetoric of the "public interest" and "fairness" with its "balancing of conflicting interests" to bring about "harmonious agreement" more difficult to implement than had been initially thought. The internal inconsistencies and confusions about the purpose and operation of the codes were resolved when the Supreme Court ruled the NIRA unconstitutional. Antitrust proposals for dealing with bigness were never seriously considered.

Monetary stimulation was the other 1933 agenda item, although to its proponents it "seemed to have been ignored" (p. 22). There were two proposals: Warren and Pearson's raising the price of gold scheme and Fisher's campaign for reflation to combat the debt disease from overindebtedness. Barber acknowledges that Fisher believed monetary expansion "might require reinforcement" with "stamped scrip" (p. 17) but does not conclude that this liquidity trap stance is a complete turnabout from Fisher's quantity theory position. The two groups were one in wanting to see prices raised but parted company because Fisher wanted continued "reflation, not inflation" until prices hit their 1926 level. Though gold was devalued and prices recovered, the gold tack was abandoned in that the price rises were deemed insufficient; consequently, gold was not allowed to double to its $41.34 allowable maximum. Fisher, while stroked, and repeatedly so in the thirties, was ignored.

Agriculture was the other major area of concern in 1933. Here Barber repeats without pointing out the irrationality of the old shibboleth that falling prices induced farmers to plant more. To aid farm recovery, there were three schemes vying for influence: AAA supply restriction through processing fees and direct payments to farmers - the Domestic Allocation Plan; tariffs on agricultural imports with no planting cutbacks; and land-use planning to retire acreage and thus reduce supply. The latter evolved into the recently ended 60+ year "emergency" farm program after the Supreme Court declared DAP unconstitutional. Tariff policy to benefit agriculture never got off the ground.

This covers the first half of the book. The development of the American macroeconomic model, the "official model" for recovery and use in wartime planning, fills out the rest. And that is an engrossing story.

Of particular importance to the development of the official model was the extremely sharp 1937-1938 slide. It was here that Currie and Hansen rise to prominence. The sizable excess reserves, even after the reserve requirement doubling, militated against a monetary explanation. Even Fisher did not object to the doubling; in fact, he supported it as a way station on the road to 100% reserves. Accordingly, a fiscal thrust, resting heavily on the Currie-Krost "net contribution of government to spending" data, became the preferred recovery policy and "for the first time, the administration committed itself to a calculated strategy of fiscal stimulation," this after a "struggle for the soul of FDR" (p. 114).

Several particularly interesting developments Barber discusses are Roosevelt's scuttling of the mid-1933 World Economic Conference with its "modernizing" of the gold standard orientation, the "gap flap," the Fisc proposal, and the formation of the CEA. The gap flap pitted the multiplier framework against the Friedman methodology in dealing with wartime counter-inflationary considerations; this methodological jousting carried over to the professional literature. The Fisc proposal envisioned establishing an independent fiscal authority with discretionary expenditure and tax policy tools akin to the Federal Reserve's for monetary policy making. The Fisc accordingly would have circumvented politicians' vote buying activities, which indicates why it never got off the ground. The CEA is shown not to be the natural result of American style, Keynesian-oriented employment policy but the accidental creation of Terborgh, a severe critic of the Full Employment Bill of 1945, which became the Employment Act of 1946.

Barber presents many other interesting proposals and policies in this fascinating tour, among which are Salant's 1941 Phillips Curve tradeoff analysis, Fisher's 1934 central bank contract in which the authorities are sacked if they do not meet a price level target, and enactment of Social Security almost as an afterthought to the unemployment insurance program, largely in response to the Townsend Clubs.

Readers certainly will get the flavor of that extraordinary period. Experts on any one of the programs will learn nothing new. Those who know a great deal about the times, however, will still enlarge their human capital. This is a book many no doubt thought of writing. Barber did it and did it well.

Frank G. Steindl Oklahoma State University