Books in Brief

Out of Work: Unemployment and Government in Twentieth-Century America, by Richard K. Vedder and Lowell E. Gallaway (Holmes & Meier, 336 pp., $49.95)

AT THE END of World War II Washington’s power and prestige was at an all-time high. Encouraged by the apparent success of wartime spending in reducing unemployment, the government made full employment an explicit policy goal. But things did not go as planned. One of the more telling statistics in a book full of them is that the average unemployment rate was lower during the first thirty years of the century—when laissez-faire was in full flower—than it was during the most recent thirty years. For explanation, the authors turn to neoclassical economic theory: the demand for labor, like that for any other good, rises when its price falls, and falls when its price rises. When labor markets are left alone, unemployment is automatically eliminated by declining real wages. This sweeping history chronicles government’s well-intentioned, but ultimately destructive, efforts to stymie this process. New Deal policies such as the Wagner Act, the NRA, and Social Security needlessly perpetuated the Depression by keeping wages high in a situation where they normally would have fallen. More recently the recovery from the 1990 recession was thwarted, according to Vedder and Gallaway’s data, by two successive increases in the federal minimum wage. Full employment is not an end in itself, however. Living standards and employment can rise simultaneously only if labor productivity also expands. This happy confluence occurred throughout the Reagan boom. Legislation such as the 1991 Civil Rights Act, the Americans with Disabilities Act, and President Clinton’s forthcoming health-care mandates make a reprise highly unlikely. —Ed Rubenstein

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Out of Work: Unemployment and Government in Twentieth-Century America, by Richard K. Vedder and Lowell E. Gallaway (Holmes & Meier, 336 pp., $49.95)

AT THE END of World War II Washington’s power and prestige was at an all-time high. Encouraged by the apparent success of wartime spending in reducing unemployment, the government made full employment an explicit policy goal. But things did not go as planned. One of the more telling statistics in a book full of them is that the average unemployment rate was lower during the first thirty years of the century—when laissez-faire was in full flower—than it was during the most recent thirty years. For explanation, the authors turn to neoclassical economic theory: the demand for labor, like that for any other good, rises when its price falls, and falls when its price rises. When labor markets are left alone, unemployment is automatically eliminated by declining real wages. This sweeping history chronicles government’s well-intentioned, but ultimately destructive, efforts to stymie this process. New Deal policies such as the Wagner Act, the NRA, and Social Security needlessly perpetuated the Depression by keeping wages high in a situation where they normally would have fallen. More recently the recovery from the 1990 recession was thwarted, according to Vedder and Gallaway’s data, by two successive increases in the federal minimum wage. Full employment is not an end in itself, however. Living standards and employment can rise simultaneously only if labor productivity also expands. This happy confluence occurred throughout the Reagan boom. Legislation such as the 1991 Civil Rights Act, the Americans with Disabilities Act, and President Clinton’s forthcoming health-care mandates make a reprise highly unlikely. —Ed Rubenstein