Economists: Who Anticipated the Great Depression?
Via
Econbrowser:
Here’s the abstract from a paper by Doug Irwin in the February issue of the Journal of Money, Credit, and Banking:
The intellectual response to the Great Depression is often portrayed as a
battle between the ideas of Friedrich Hayek and John Maynard Keynes.
Yet both the Austrian and the Keynesian interpretations of the
Depression were incomplete. Austrians could explain how a country might
get into a depression (bust following a credit-fueled investment boom)
but not how to get out of one (liquidation). Keynesians could explain
how a country might get out of a depression (government spending on
public works) but not how it got into one (animal spirits). By contrast,
the monetary approach of Gustav Cassel has been ignored. As early as
1920, Cassel warned that mismanagement of the gold standard could lead
to a severe depression. Cassel not only explained how this could occur,
but his explanation anticipates the way that scholars today describe how
the Great Depression actually occurred. Unlike Keynes or Hayek, Cassel
analyzed both how a country could get into a depression (deflation due
to tight monetary policies) and how it could get out of one (monetary
expansion).