Sunday Morning Audio: The German Economic Miracle By David Henderson

Garrett M. Petersen, aka the “Economics Detective,” interviewed me a few weeks ago about the post-World War II German economic miracle. I had written about it in “German Economic Miracle” in The Concise Encyclopedia of Economics. Garrett, a Ph.D. student in economics at Simon Fraser University, is a first-rate interviewer. The interview is titled “The German Economic Miracle with David Henderson.” It goes longer than the usual, at about 52 minutes.

Some highlights follow.

The first 5 minutes: The setting. What horrible shape the German postwar economy was in and how much of was due to extreme price controls.

5:10: Reminiscence about interaction with Bill Meckling and Milton Friedman at the 1979 Hoover/Rochester conference on the draft. The issue: conscription during WWII.

6:30: Good for the Allies that the Germans had price controls during the war.

6:50: The Allies kept the German price controls after WWII.

8:40: Why Konrad Adenauer (“der Alte”) stood out and looked good to Allies.

9:45: Adenauer recommends Ludwig Erhard, who had good anti-Nazi bona fides.

11:45: Currency reform.

12:20: How Erhard had a fun summer in 1948.

13:00: Erhard’s humorous confrontation with General Clay.

13:25: The DM is a ration coupon.

13:50: The dramatic effect on the German economy.

15:20: Walter Heller, later JFK’s chief economist, on the value of currency reform and elimination of price controls.

16:28: My personal story about my phone conversation with Walter Heller.

18:00: Heller sees the value of cutting marginal tax rates to improve incentives.

20:45: I couldn’t find support for the claim that Erhard clearly broke the rules on his own.

25:00: My story about my mentor, Clancy Smith, and his “cigar interaction” with Ludwig Erhard in Winnipeg.

26:20: Recovery not due to Marshall Plan. I draw on Tyler Cowen’s excellent 1986 article on this.

32:50: Contrast with East Germany.

33:50: Katarina Witt’s rewards for good skating.

35:50: Petersen’s insight about the incentives in research and how they can distort our understanding of the big picture.

37:25: Natural disasters in a fairly free economy don’t have big long-term effects. Jack Hirshleifer’s work. “Disaster and Recovery.”

39:35: Ludwig Erhard takes the government’s foot off the hose.

42:20: The moral of the story.

42:30: How I got the chance to do The Fortune Encyclopedia of Economics in 1990.

44:20: The role of Alan Russell of Liberty Fund in getting the Fortune Encyclopedia on line as The Concise Encyclopedia of Economics.

46:50: My George Stigler story; also Paul Krugman easy to work with.

47:45: Petersen’s point about the Encyclopedia being non-partisan.

48:50: My confrontation with my editor at Fortune. The Kip Viscusi story about worker safety.

50:25: My willingness to go to the mat–run my net worth down to zero–over quality.