May 09, 2008
"Lessons from the Great Depression" (Updated)

I gave a speech last night to the Phi Beta Kappa Association of the Mid-South on "Lessons from the Great Depression" and promised my hosts that I would post links to my sources and other resources on DOL. I summarized the received wisdom on the Depression (inept monetary policy) and then we talked briefly about credit expansion during the Q&A. Resources are below. NB: right after I saved this entry the first time, I saw James Hamilton's post from this morning asking "what if we'd been on the gold standard" today. It's now included among the links.

1. The online encyclopedia at EH.net has several articles on the Great Depression. I drew primarily from Randall Parker's "Overview of the Great Depression" and Frank Steindl's "Economic Recovery in the Great Depression," both of which I assign in my economic history class. Here is Professor Parker's website, where you can download the transcript of his one-hour interview with Ben Bernanke.

2. We discussed the case for and against the gold standard, though I didn't give the case for the gold standard the attention it deserves. Lawrence H. White (my co-blogger here at DOL) has a very good Briefing Paper for the Cato Institute in which he deals with common objections to the gold standard. For a more detailed debate about banking in theory and practice, here are articles by J.G. Hulsmann and Professor White on fractional-reserve banking. Here's James Hamilton's aforementioned post on the gold standard and how it might have worked today. Hamilton makes the important point that any country which can go on the gold standard can also go off of it. I remain in Professor White's camp in my support of free-market money. If you want to write contracts payable in gold, silver, euros, yen, or potatoes, go right ahead. Given the weak dollar. I might argue that the best-performing asset in my portfolio is the extra euro-denominated airport shuttle pass I accidentally bought in Amsterdam last year. But I digress.

3. We also talked about Robert Higgs and his contributions to the theory of "wartime prosperity," and we concluded that the conventional "World War II ended the Great Depression" explanation is at best wanting, at worst false. Here is his re-assessment of "wartime prosperity." His discussion of "regime uncertainty" and the institutional conditions that created the microeconomic disaster that was the New Deal and prolonged the Depression is available here.

4. Finally, we discussed the Clinton/McCain gas tax controversy and why that makes me pessimistic about the ability of the political system to produce constructive policy. Here's Bryan Caplan's defense of the Clinton proposal and N. Gregory Mankiw's evaluation of why economists should be concerned. Finally, here's the Colbert Report on the proposed gas tax holiday (courtesy of Greg Mankiw).

5. In addition to what we talked about last night, the internet is filled with resources exploring the Great Depression and economic policy more broadly. The Ludwig von Mises Institute maintains an excellent online audio and video archive; here are several lectures on the Great Depression. Auburn University economist Roger W. Garrison is perhaps the leading exponent of what is called "capital-based macroeconomics" or "Austrian Business Cycle Theory." His website contains numerous resources (including several entertaining Powerpoint presentations) in which he shows how credit expansion leads to economic instability.

Posted by Art Carden at 11:11 AM in Economics

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