Empirical literature/commentary on Great Depression

**Shek** · 05 Mar 09,, 15:57

I've created this thread as a placeholder for posters to post empirical literature/research/commentary on the Great Depression as they come across so that people can form their own opinions on the most persuasive strain of economic thought about the causes of the Great Depression, the causes of the recovery, and the applicability of this literature to our current recession.

**astralis** · 05 Mar 09,, 16:07

from someone that you may have heard of.

"Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression."
Bernanke, Ben.

Abstract: This paper examines the effects of the financial crisis of the 1930s onthe path of aggregate output during that period. Our approach is complementary to that of Friedman and Schwartz, who emphasized the monetary impact of the bank failures; we focus on non-monetary (primarily credit-related) aspects of the financial sector--output link and consider the problems of debtors as well as those of the banking system. We argue that the financial disruptions of 1930-33 reduced the efficiency of the credit allocation process; and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand. Evidence suggests that effects of this type can help explain the unusual length and depth of the Great Depression.

http://www.nber.org/papers/w1054.pdf

not as wonky version:

http://www.amazon.com/Essays-Great-D.../dp/0691118205

**xinhui** · 05 Mar 09,, 17:15

Picked up a copy Amity Shlaes's "The Forgotten Man" and planning to read it soon

Here is her blog which deals which has many entries related to the Great Depression.

http://blogs.cfr.org/shlaes/

**Shadowsided** · 08 Mar 09,, 20:24

Just some stuff I posted earlier

How Government Prologned the Depression

How Government Prologned the Depression

**Shek** · 09 Mar 09,, 21:40

This isn't about the Great Depression, but it looks at the spending multiplier.

http://www.volkerwieland.com/docs/CCTW%20Mar%202.pdf

Renewed interest in fiscal policy has increased the use of quantitative models to evaluate policy. Because of modelling uncertainty, it is essential that policy evaluations be robust to alternative assumptions. We find that models currently being used in practice to evaluate fiscal policy stimulus proposals are not robust. Government spending multipliers in an alternative empirically-estimated and widely-cited new Keynesian model are much smaller than in these old Keynesian models; the estimated stimulus is extremely small with GDP and employment effects only one-sixth as large and with private sector employment impacts likely to be even smaller.

The impact of the stimulus is much less than advertised according to this study, with it being negative in some of the out quarters.

**ArmchairGeneral** · 10 Mar 09,, 03:47

I've been meaning to post this since I read it a few days ago. Interesting counterpoint to Roosevelt haters like me from the conservative side.

http://article.nationalreview.com/?q...c3MzU0OWU2NGM=

First couple of paragraphs:

Roosevelt & the Revisionists
FDR was a reformer, yes — but he reformed the more certainly to conserve.

By Conrad Black

As the current financial crisis has unfolded, Franklin D. Roosevelt has been frequently traduced for the economic policies he used to lead the country out of the Great Depression.

In 1933, there was great disagreement about how to deal with an economic recession or depression, and Roosevelt’s administration, and the president himself, had conflicting impulses. Herbert Hoover had made the worst possible selection of policy options: higher taxes and tariffs and a shrunken money supply. The unemployment rate was approximately 33 percent, more than four times what it is now (not the 25 percent the revisionist Right now claims), and there was no direct relief for the unemployed. They could beg, steal, or starve, though Hoover claimed that they prospered selling apples.

On Inauguration Day 1933 (then March 4), there were machine-gun nests at the corners of the great government buildings in Washington, for the only time since the Civil War. Almost all banks in 38 states had been closed sine die. In most of the other states and Washington, D.C., withdrawals were limited to 5 percent of deposits, and in Texas to $10 per day. The New York Stock Exchange and the Chicago commodity exchange had been closed, indefinitely. The financial system had effectively collapsed. In a fever of activity, Roosevelt guaranteed bank deposits, made the federal government a temporary non-voting preferred shareholder in thousands of suddenly undercapitalized banks (more than half the banks in the country), refinanced millions of residential and farm mortgages, put millions of people to work in relief programs, tolerated cartels and collective bargaining in order to raise prices and wages, increased the money supply, effectively departed the gold standard, repealed Prohibition of alcoholic beverages (wrenching one of the nation’s largest industries out of the hands of the underworld), and legislated reduced working hours and improved working conditions for the whole work force. In the next two years, he set up the Securities and Exchange Commission, created the Social Security system, broadened the powers of the Federal Reserve to equal those of other nations’ central banks, and imposed some entirely political tax changes to stave off Huey Long and other extremists, in what became known as the Second New Deal...

**editec** · 29 May 11,, 15:20

John Maynard Keynes' The Economic Consequences of the Peace is worthy of a read.

It was written in 1919 and some of you might find it telling that his POV about the near future (now the past for us) was so insighful.

I think some of us might also find the essay: "The end of laissez-faire" worthy of our time/

I find the following observation -- written in 1926, bear in mind -- rather fortelling and especially compelling now that we've seem both the recent Republican and Democratic responses to our most recent economic crises:

But more interesting than these is the trend of joint stock institutions, when they have reached a certain age and size, to approximate to the status of public corporations rather than that of individualistic private enterprise. One of the most interesting and unnoticed developments of recent decades has been the tendency of big enterprise to socialise itself. A point arrives in the growth of a big institution - particularly a big railway or big public utility enterprise, but also a big bank or a big insurance company - at which the owners of the capital, i.e. its shareholders, are almost entirely dissociated from the management, with the result that the direct personal interest of the latter in the making of great profit becomes quite secondary. When this stage is reached, the general stability and reputation of the institution are the more considered by the management than the maximum of profit for the shareholders. The shareholders must be satisfied by conventionally adequate dividends; but once this is secured, the direct interest of the management often consists in avoiding criticism from the public and from the customers of the concern. This is particularly the case if their great size or semi-monopolistic position renders them conspicuous in the public eye and vulnerable to public attack. The extreme instance, perhaps, of this tendency in the case of an institution, theoretically the unrestricted property of private persons, is the Bank of England. It is almost true to say that there is no class of persons in the kingdom of whom the Governor of the Bank of England thinks less when he decides on his policy than of his shareholders. Their rights, in excess of their conventional dividend, have already sunk to the neighbourhood of zero. But the same thing is partly true of many other big institutions. They are, as time goes on, socialising themselves.

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