Some professors find a second wind when they stop teaching. Norman Maclean wrote A River Runs Through It after he retired from the University of Chicago, in 1973. Fifteen years later, he published a sequel, Young Men and Fire. Samuel Hynes, of Princeton University, has a hit on his hands with The Unsubstantial Air: American Fliers in the First World War – at 90! Charles P. Kindleberger published Manias, Panics, and Crashes: A History of Financial Crises after becoming emeritus at the Massachusetts Institute of Technology in 1976 and then kept writing for another twenty-five years.
Meet Elmus Wicker, economic historian, of Indiana University. Since his retirement, in 1993, Wicker has published three slim, dense, but thoroughly accessible and strangely graceful books, each about 150 pages long. Any one of them would be easy to overlook, but together they represent detailed portraits of three of the four signal events in the monetary history of the United States since 1867.
They are The Banking Panics of the Gilded Age (Cambridge University Press, 1996); The Great Debate on Banking Reform: Nelson Aldrich and the Origins of the Fed (Ohio State University Press, 2005); and The Banking Panics of the Great Depression (Cambridge, 2000). What’s missing? Only a narrative of the fourth such episode, the banking panic of 2008. As Wicker has written: “The recent financial crisis came as a total surprise. I never expected to see a reoccurrence in my lifetime.” Neither did anyone else.
That’s why a substantial fraction of the small community of economists who take seriously the historical perspective on central banking traveled to Bloomington, Ind., in rolling hills 40 miles southwest of Indianapolis, for a day-long conference last month to honor the 88-year-old Wicker.
Ellis Tallman, of Oberlin College and the Federal Reserve Bank of Cleveland, who, with Eric Leeper, of Indiana University, organized the conference, recalled, “I ran into Elmus at an economics conference in 1995 or so. I asked him why he was attending, since I’d been told he had retired. He replied, ‘Ellis, retirement means doing only what you like to do.’” Wicker clearly enjoyed the proceedings. “Rarely [otherwise] does anyone recognize your presence [in the field],” he said.
Speakers included Charles Calomiris, of Columbia University; High Rockoff, of Rutgers University; Richard Sylla, of New York University; Gary Gorton, of Yale University’s School of Management; Jeremy Atack, of Vanderbilt University; Mary Tone Rodgers, of the State University of New York at Oswego; George von Furstenberg, of Indiana; James Boughton, of the International Monetary Fund; Gary Richardson, of the Federal Reserve Bank of Richmond; David Wheelock, of the Federal Reserve Bank of St. Louis; Will Roberds of the Federal Reserve Bank of Atlanta; and Al Broaddus, former president of the Richmond Fed.
Wicker was born in 1926, in Lake Charles, La. He graduated at 18 from Louisiana State University, received a master’s in 1948 there and spent the next three years as a Rhodes Scholar at Queens College, Oxford. John Hicks, already famous as a mathematical economist, was his tutor. Wicker received his Ph.D. from Duke University in 1956.
By then he was teaching at Indiana University and there he remained for the next 40 years, a legendarily demanding teacher who led the movement to establish an honors college and helped launch a second good department of economics in Bloomington, at the business school. Wicker to students, circa 1969: “If some of you don’t flunk this examination, I’ll swim to Moscow and back!” Voice from the rear of the hall, “Why back?”
Throughout, Wicker’s intellectual journey has closely paralleled the joint project of Milton Friedman and Anna Schwartz, whose landmark book, A Monetary History of the United States 1867-1960, called attention to the banking panics of the 1930s. So little-noted had these been in the tumult of the onset of the Great Depression that they were all but forgotten until 1962, when Friedman and Schwartz assigned great significance to the collapse of banking and credit.
Wicker’s first book, Federal Reserve Monetary Policy 1917-1933 (Random House). appeared in 1966. Its concluding chapter: “From Easy Money to the Collapse of the Banking Mechanism: 1932-1933.” For the next 15 years, he conducted a kind of siege warfare against strict monetarist interpretations of the Great Depression. A colleague arranged an introduction to Schwartz, a National Bureau of Economic Research associate of sterling reputation. She and Wicker became mutual admirers. A money and banking textbook, written with his friend Boughton, never saw a second edition, but by then the ever-closer attention Wicker paid to the events of the early '30's had begun to pay off.
The galvanizing event, Wicker later wrote, was discovery on a library shelf of John McFerrin’s “remarkable but largely neglected” study of Caldwell and Co., the largest investment banking house in the South, whose failure in 1930 precipitated runs on 120 banks in four states. The collapse of this “Morgan of the South” turned out to be far more important than New York’s unfortunately-named Bank of the United States, a commercial bank serving a mainly immigrant population to whose failure Friedman and Schwartz had attached great significance.
Wicker published two journal articles based on his discoveries, but not until retirement was he able to set down his reinterpretation of the events of the '30s's in book form. His verdict? It was complicated – far more complicated than the simple story of Fed ineptitude that Friedman and Schwartz had given their readers to believe.
By then, however, Calomiris and Gorton, working together, had raised a new set of questions about the possibility that the Fed had helped turn an ordinary recession into a deep depression. They argued in a 1991 paper that the nature of banking panics had fundamentally changed after the Fed was created to take over responsibilities previously shouldered collectively by the banking industry itself.
Hence Wicker’s second book, a close look at panics in the period governed by the National Banking Acts of 1863 and 1864, culminating in the Panic of 1907. His conclusion, “The New York Clearing House bungled a once-and-for-all opportunity for effective voluntary action to forestall banking panics and thereby ward off the establishment of a government central bank, voluntary action failed, and government intervened to fill the vacuum.” The third book, an examination of the political debate through which the Fed was put together, follows naturally in turn. A fourth manuscript, an examination of the Fed’s attempts to pop stock market bubbles, as in the poorly-timed tightening of 1928, awaits a publisher.
Wicker’s books are expensive -- $130 if you wanted to buy all three. I wish someone would put them together in a single paperback edition, perhaps with some new material and a foreword by one of the younger scholars. It would make a readable tour of banking history for the general reader, with enough theory thrown in to understand something of economists’ disagreements about the facts. It would give the most energetic and scrupulous critic of Friedman and Schwartz some of the visibility he deserves. More important, it would broaden understanding of what happened in 2008, by putting those events where they belong – in historical perspective.
David Warsh, a longtime financial journalist and economic historian, is proprietor of Boston-area-based economicprincipals.com.