Regarding my thesis that the 1929 stock market crash was caused by the imminence of passage of the protectionist Smoot-Hawley Tariff Act of 1930, William Hawkins (Polemics & Exchanges, June 1989) dismisses my findings as the work of a mere “journalist, not an economist.”

It was precisely my expertise as a political journalist, not an economist, that led me to the facts linking Smoot-Hawley action on the Senate floor in the last week of October 1929 and the Wall Street crash of that same week. Had I studied economics in the United States in the 1950’s, I would have been forced to learn demand theory, which has been satisfied with the feeble demand-theory explanations of the crash. (J.K. Galbraith is hailed by demand-siders for his circuitous explanation that the market crashed because speculators had bid it up too high; Murray Rothbard and Hawkins prefer the monetarist argument that the “inflation of the 1920’s” brought on the Depression, when in fact there is no record of an inflation in the 1920’s, the general price level being steady as a rock.)

As associate editor of The Wall Street Journal in the mid-1970’s, I had been impressed with the modern-day supply-siders—Robert Mundell, the Canadian, and his protege, Arthur Laffer—who had been able to forecast and explain the stagflation of the 1970’s far better than the Keynesians and monetarists of the demand school. In preparing my book, The Way the World Works, I knew I had to find a supply shock to explain the Crash of 1929. Classical theory’s supply-side analytical framework had been discredited in the 1930’s precisely because classicists at the time could not explain the market crash. (Lord Keynes begins his 1936 General Theory with a denunciation of Say’s Law, the classical underpinning of supply-side theory, for this very reason.)

I was frustrated in this endeavor until I learned, in a monograph by Gottfried Haberler, that the Smoot-Hawley Tariff Act had been enacted in 1930, not 1931 as I had recollected. As a journalist, I knew that the same Congress sitting in 1930 was sitting in 1929, and that it could have made the key decisions in the earlier year. I immediately went to The New York Times microfilms of 1929 and found exactly that: the US Senate, which had been widely thought to oppose the tariff legislation as the week opened, steadily turned to support of the bill, which had already passed the House in March. The chronology fit my hypothesis precisely, hour by hour. It has not been challenged in 11 years, except by hyperbole. Martin Anderson of The Hoover Institution advised me that the economics profession would not recognize my discovery for decades, that, as he put it, “American economists are still trying to explain how Adam Smith could have written The Wealth of Nations without possessing an economics degree.”

Journalists are required by professional standards to supply evidence to support assertions. Economists all too often propound grandiose theories of the way the world works without making any attempt to fit their models with reality. After a spirited discussion of the Jamaican economy at an IMF conference in Kingston in 1976, the late Arthur Burns asked me where I had studied economics. When I replied that I had never taken a college course in economics, Dr. Burns put his hand on my shoulder and said, “My boy, that is your advantage.” I believe it was and remains so.

        —Jude Wanniski, President
Polyconomics, Inc.
Morristown, NJ