Andrew Jalil and Gisela Rua fail the test of time from the Great Depression

Here I deal with two economists who want to use a constant time variable in 1930 that was used in 1920. Time literally changed in the 1930s, folks, it speeded up in one direction from one day to one hour per transaction, due to radio, as a result of radio broadcasting. I go into that below, as I have done countless times. But let's start with a  quote from the authors.


Inflation expectations and the Great Depression:
 

According to the Federal Reserve, industrial production rose 57 percent from March to July (see Figure 1). Department store sales, as shown in Figure 6, increased nearly 20 percent in the same period. Prices also rose, though less remarkably
—
Figure 2 shows that wholesale prices (PPI) rose 14 percent while consumer prices increased 4 percent from March to July. This expansion in total nominal spending without a commensurate growth in
the money supply indicates that any explanation of the recovery should be consistent with an increase in the velocity of money in circulation. This increase in velocity
can be easily confirmed using the accounting identity MV=PY. With the price level (P)
little changed during this period and the money supply (M) not increasing in line with the expansion in output (Y), there must have been a corresponding increase in velocity (V). Friedman and
Schwartz also validate this interpretation by pointing to the
reduction in the public’s money balances relative to income (an increase in the velocity of money) as an important contributor to
the recovery after the banking panic.

Hmm...:
Let's see, an expectation of higher prices makes us transact goods faster, according to the theory.  The money equations says we  transact faster because that prices did not rise fast enough to account for the nominal GDP rise. 

OK, no model really explains this, this is pure fantasy.
The author's go on to regression statistics and try and find the source of the velocity increase.  They measure the amount of inflation talk in the newspapers.

What do they find? Lots of talk about general inflation, and specific commodity inflation. What is the control group, what else did people talk about suddenly? We do not know, the authors have no other control words.

Here is the control variables from that era:

PBS History of radio:

For the radio, the 1930s was a golden age. At the start of the decade 12 million American households owned a radio, and by 1939 this total had exploded to more than 28 million.
But why was this ‘talking telegram’ so popular?
As technology improved radios became smaller and cheaper. They became the central piece of furniture in the average family’s living room, with parents and children alike, crowding around the set to hear the latest instalment of their favourite show.
Radio may have had such mass appeal because it was an excellent way of uniting communities of people, if only virtually.
It provided a great source of entertainment with much loved comedians such as Jack Benny and Fred Allen making their names on the wireless.
It marked the advent of the soap opera, a running story that people could return to, with characters they could sympathise with and love. The series ‘Our Gal Sunday’ - about a small town girl finding love with a wealthy Englishman - had the young women of the country glued to their sets.
Radio programs provided a source of inspiration, with heroes like the Lone Ranger and The Shadow getting embroiled in deadly capers. But they also promoted old-fashioned American family values and gave people a model to live by. On Wednesday nights at 8pm when the public tuned in to ‘One Man’s Family’ they were greeted with the opening: ‘Dedicated to the mothers and fathers of the younger generation and to their bewildering offspring.’

News broadcasts also influenced the way the public experienced current affairs. When the Hindenburg airship exploded in 1937, reporter Herb Morrison was on the scene, recording the events to be broadcast the following day.

Radio broadcast technology communication technology wipes out any of the authors regression statistics, wipe them clean off the map.

And, it more than explains the sudden increase in velocity because it wipes out half the sales cycle across the board, a single overnight doubling of the transaction rate will swamp any story about inflation expectations. Advertiser wen from reaching 100,000 at a time on print to reaching 10 million at a time with the Lone Ranger show. Prices quoted real time over a speed of light media to a 10 million consumers? The technology wipes out the entire statistical sample of anything any banker of president did in the era. 

And the fact that economists failed to understand or even measure its impact is a horror story of economics.  Economists get a clue, what say? Start with the big picture, the narrative among consumers in that era was all about what they hear on the radio, the products, the prices and the corporations who make the goods.

This is yet another case of the economics profession failing to see adapting statistics, they thing the Magic Walrus still lives, and all eras timelessly the same..