Edmund Phelps, Meet Harry Hopkins

Edmund Phelps, the 2006 winner of the Nobel Prize in economics has probably heard of Harry Hopkins (maybe he even quotes him in his book). But the similarities between things they both said are interesting. This hardly means that Phelps copied Hopkins. The fascinating thing is that similar issues were being discussed so long ago.

In a 1935 NY Times article, Harry Hopkins, Federal Emergency Relief Administrator was quoted:

"There are those who tell us that we should avoid relief. They say that straight relief is cheaper. No one will deny this contention. It costs money to put a man to work. Apparently, to the advocates of direct relief the primary object of relief is to save the government money. The ultimate humane cost to the government never occurs to them-of a continued situation through which its citizens lose their sense of independence and strength and their sense of individual destiny. Work preserves a man's morale. It saves his skill. It gives him a chance to do something socially useful."

(if you have access to Proquest or some data base like that, you can find this article-some information on it is below)

Below is a quote from the Chronicle of Higher Education (Monday, October 9, 2006-extra email edition)on Phelps winning the Nobel Prize:

"In a 1972 book, he suggested that large spikes in unemployment might have irreversible destructive consequences, as workers' skills and morale deteriorated while they sat at home. Just as inflation can have cancerous effects on business owners' long-term expectations, he suggested, unemployment can have poisonous effects on workers' long-term hopes.

More recently, Mr. Phelps has put forward an idiosyncratic public-policy proposal: He would like the federal government to provide tax subsidies to businesses that hire low-wage workers. His idea is to raise wages for low-skilled workers just high enough that many more of them will be interested in taking jobs.

In Rewarding Work: How to Restore Participation and Self-Support to Free Enterprise (Harvard University Press, 1997), he argued that his proposed subsidies would make labor markets tighter and would have wide-ranging social benefits, including reduced crime. "The subsidies would have the 'multiplier effect,'" he wrote, "of alleviating the pessimism and poor preparation that tend to spread like a contagion in poor communities."

In an interview with The Chronicle in 2003, Mr. Phelps explained one reason why he believes that the federal subsidies should be paid to employers, rather than being given directly to low-wage workers, as in the Earned Income Tax Credit. "It's better for the worker to see the total compensation coming from the firm," he said. "I think that adds to self-respect if the worker is not constantly reminded that you're in a special program -- that, look, you're a low-productivity guy and that's why your employer is only paying you nickels and dimes" (The Chronicle, January 16, 2004). "

Article information THE ROAD TO RECOVERY: SPENDING OR SAVING?; The Debate Is Renewed Between Those Who Advocate Large Expenditures for Public Works and Those Who Insist That Steps Should Be Taken to Balance the Budget and Encourage Private Business By HENRY HAZLITT.. New York Times (1857-Current. Jan 6, 1935. p. XX1 (1 page)