World trade slumped.

As the great economist Ludwig von Mises has said, causes and effects in economics are impossible to connect, so we do not know what effect Smoot-Hawley had on worsening the Depression. In economics, each case has elements of uniqueness. Economics is not physics, and experiments are impossible to conduct with enough control to consistently give us predictable results. We do not know at all what effects Smoot-Hawley, as compared with the collapsing world economy, had on trade.

Image Credit... Philip Anderson

At the time of its enactment, exports were only about 5 percent of the economic output of the United States and still outweighed imports. (Even now, exports are a smaller part of output in the United States than in any other large developed nation.) To say that the act, which applied to a distinct minority of imports and which raised tariffs generally by only about six percentage points, caused the Depression is almost comical. It did no good, but compared with the titanic monetary policy disasters of the era, the effect of Smoot-Hawley was probably very small, or so most mainstream economists believe.

However, a number of well-known people, especially my former colleagues at The Wall Street Journal editorial page, the late Robert Bartley (a genuinely great guy) and Jude Wanniski, began in the mid-1970s to popularize the notion that Smoot-Hawley and not monetary policy mistakes was the real cause of the Great Depression.

This popularization was a form of intellectual entrepreneurship, in which people carve out an appealing idea and then try to make capital of it. In this case, the argument actually has some usefulness in cautioning us against adopting protectionism on a large scale as a way out of our current economic troubles. That is, while it is a mistaken notion, it still has some beneficial effects. While the proponents of attributing large effects to Smoot-Hawley are not generally prominent in economics, they are well known and their views keep us on the straight and narrow about the virtues of free trade. (These, too, have been seriously questioned in recent years by economists as respected as Paul A. Samuelson, the Nobel Prize-winning professor emeritus at the Massachusetts Institute of Technology. The Adam Smith idea that free trade always benefits every nation that practices it is very much in question now.)

Anyway, that’s Smoot-Hawley, or Hawley-Smoot, my main economics lesson of this Sunday.

I would also respectfully like to make a personal observation about money. Lately it has come crushingly upon me that when I was a child, I was stupendously extravagant by the standards of the 1950s and 1960s. ( I still am.) What must my mother and father, who grew up in the Great Depression, who had to work for every dime, who had to live with economies I cannot imagine, have thought of my extravagance?