Abstract
This chapter analyzes the Great Depression in detail. The Great Depression has been analyzed many times, even a few times based on Austrian business cycle theory (ABCT).1 Most writers on the Great Depression do not analyze that episode using ABCT and therefore are led to commit a number of errors. These errors include, but are not limited to, believing that the constraints of the gold standard caused or made the Great Depression worse and that recovery was only possible by abandoning the gold standard. They also include the belief that the Great Depression was caused by a reduction in consumption and that the solution to recovery was expansionary “fiscal policy.”2 These claims will not be addressed in this chapter. I address them elsewhere.3
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Notes
For examples of analyses of the Great Depression from an Austrian perspective, see Murray N. Rothbard, America’s Great Depression, 5th ed. (Auburn, AL: Mises Institute, 2000);
Jay Cochran III, “Of Contracts and the Katallaxy: Measuring the Extent of the Market, 1919–1939,” The Review of Austrian Economics vol. 17, no. 4 (2004), pp. 407–466; and
Lionel Robbins, The Great Depression (London: Macmillan and Co., 1934).
For an example of a book in which the former error is committed, see Barry Eichengreen, Golden Fetters (New York: Oxford University Press, 1992). For an example of a book in which the latter error is committed, see
Peter Temin, Did Monetary Forces Cause the Great Depression? (New York: W. W. Norton & Co., 1976).
Regarding the role of gold in causing the Great Depression, I have not addressed these claims in a discussion specifically pertaining to the Great Depression but have addressed them in discussions on the benefits of the gold standard and refutations of criticisms of the gold standard in Chapter 7 of Brian P. Simpson, Money, Banking, and the Business Cycle, Volume 2: Remedies and Alternative Theories (New York: Palgrave Macmillan, 2014). Regarding the claims concerning consumption and the Great Depression, I have not addressed them specifically as they pertain to that event but address them in chapter 2 in this book on the discussion of so-called fiscal policy and the alleged Keynesian multiplier and in chapters 5 and 6 on the discussion of proposed Keynesian solutions to recessions in the latter part of the twentieth century and the beginning of the new millennium. My refutation of the underconsumption theory of the business cycle, including the Keynesian version of this theory, in Chapter 1 of Simpson, Money, Banking, and the Business Cycle, Volume 2 also addresses the claims regarding consumption and the Great Depression. Chapter 3 of ibid. (specifically, the refutation of real business cycle theory) can be used to address other attempted explanations of the Great Depression.
Carol Corrado, “Industrial Production and Capacity Utilization: The 2002 Historical and Annual Revision,” Federal Reserve Bulletin vol. 89 (April 2003), pp. 151–176. See p. 165 for a statement of the broad nature of the materials index.
See Benjamin M. Anderson, Economics and the Public Welfare: A Financial and Economic History of the United States, 1914–46 (Indianapolis, IN: Liberty Press, 1979 [1949]), pp. 156 and 190 for the details of purchases of government securities by the Fed during this period.
Jeremy Atack and Peter Passell, A New Economic View of American History, 2nd ed. (New York: W. W. Norton & Company, 1994), p. 588.
Jay Cochran III, Contracts, Collapse, and Coercion: A Katallactic Reappraisal of the Great Depression (Ann Arbor, MI: Bell & Howell Information and Learning Company, 2000), p. 43.
On the point of government controls making the Great Depression far worse than it needed to be, see Cochran, Contracts, Collapse, and Coercion, pp. 6–10 and 59–124; George Reisman, Capitalism: A Treatise on Economics (Ottawa, IL: Jameson Books, 1996), pp. 589–591;
Robert Higgs, “Regime Uncertainty,” The Independent Review vol. 1, no. 4 (Spring 1997), pp. 561–590; and
Richard M. Salsman, “Roosevelt’s Raw Deal,” The Intellectual Activist vol. 18, no. 8 (August 2004), pp. 9–20.
See Brian P. Simpson Markets Don’t Fail! (Lanham, MD: Lexington Books, 2005) for why altruism and collectivism lead to government controls. See Chapters 1, 4, 6, and 7.
Richard M. Salsman, “Hoover’s Progressive Assault on Business,” The Intellectual Activist vol. 18, no. 7 (July 2004), pp. 10–20. See in particular pp. 13–15.
Arthur M. Schlesinger Jr., The Age of Roosevelt: The Crisis of the Old Order, 1919–1933, vol. 1 (Boston: Houghton Mifflin Co., 1956), pp. 81–82.
See US Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1970, part 1 (Washington, DC: US Government Printing Office, 1975), series F54 and F60, pp. 229–230 for the data used to calculate these numbers.
For more on these topics, see Reisman, Capitalism, pp. 350–354 and Henry Hazlitt, Economics in One Lesson (New York: Arlington House Publishers, 1979), pp. 74–89.
On these three agricultural acts, see Cochran, Contracts, Collapse, and Coercion, pp. 70–71 and Gary M. Walton and Hugh Rockoff, History of the American Economy, 9th ed. (Toronto: Thomson Learning, Inc., 2002), pp. 529–531.
Cochran, Contracts, Collapse, and Coercion, pp. 149–150. Cochran’s list of legislation signed into law during the first 100 days of FDR’s first term is slightly different than Atack and Passell’s. For yet another slightly different list, see Arthur M. Schlesinger Jr., The Age of Roosevelt: The Coming of the New Deal, vol. 2 (Boston: Houghton Mifflin Co., 1958), pp. 20–21.
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© 2014 Brian P. Simpson
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Simpson, B.P. (2014). The Great Depression. In: Money, Banking, and the Business Cycle. Palgrave Macmillan, New York. https://doi.org/10.1057/9781137331496_9
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