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Essays on the Great Depression

Essays on the Great Depression

Ben S. Bernanke
Copyright Date: 2000
Edition: STU - Student edition
Pages: 320
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  • Book Info
    Essays on the Great Depression
    Book Description:

    Few periods in history compare to the Great Depression. Stock market crashes, bread lines, bank runs, and wild currency speculation were worldwide phenomena--all occurring with war looming in the background. This period has provided economists with a marvelous laboratory for studying the links between economic policies and institutions and economic performance. Here, Ben Bernanke has gathered together his essays on why the Great Depression was so devastating.

    This broad view shows us that while the Great Depression was an unparalleled disaster, some economies pulled up faster than others, and some made an opportunity out of it. By comparing and contrasting the economic strategies and statistics of the world's nations as they struggled to survive economically, the fundamental lessons of macroeconomics stand out in bold relief against a background of immense human suffering. The essays in this volume present a uniquely coherent view of the economic causes and worldwide propagation of the depression.

    eISBN: 978-1-4008-2027-6
    Subjects: Economics

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Preface
    (pp. vii-2)

    • One The Macroeconomics of the Great Depression: A Comparative Approach
      (pp. 5-38)

      To understand the Great Depression is the Holy Grail of macroeconomics. Not only did the Depression give birth to macroeconomics as a distinct field of study, but also—to an extent that is not always fully appreciated—the experience of the 1930s continues to influence macroeconomists’ beliefs, policy recommendations, and research agendas. And, practicalities aside, finding an explanation for the worldwide economic collapse of the 1930s remains a fascinating intellectual challenge.

      We do not yet have our hands on the Grail by any means, but during the past fifteen years or so substantial progress toward the goal of understanding the...


    • Two Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression
      (pp. 41-69)

      During 1930–33, the U.S. financial system experienced conditions that were among the most difficult and chaotic in its history. Waves of bank failures culminated in the shutdown of the banking system (and of a number of other intermediaries and markets) in March 1933. On the other side of the ledger, exceptionally high rates of default and bankruptcy affected every class of borrower except the federal government.

      An interesting aspect of the general financial crises—most clearly, of the bank failures—was their coincidence in timing with adverse developments in the macroeconomy.¹ Notably, an apparent attempt at recovery from the...

    • Three The Gold Standard, Deflation, and Financial Crisis in the Great Depression: An International Comparison
      (pp. 70-107)

      Recent research on the causes of the Great Depression has laid much of the blame for that catastrophe on the doorstep of the international gold standard. In his new book, Temin (1989) argues that structural flaws of the interwar gold standard, in conjunction with policy responses dictated by the gold standard’s “rules of the game,” made an international monetary contraction and deflation almost inevitable. Eichengreen and Sachs (1985) have presented evidence that countries which abandoned the gold standard and the associated contractionary monetary policies recovered from the Depression more quickly than countries that remained on gold. Research by Hamilton (1987,...

    • Four Deflation and Monetary Contraction in the Great Depression: An Analysis by Simple Ratios
      (pp. 108-160)

      Recent research into the causes of the Great Depression has ascribed a central role to the worldwide collapse in national money supplies, which led to sharp contractions in aggregate demand and falling prices during the late 1920s and early 1930s. The bulk of the worldwide monetary contraction, in turn, has been attributed by most recent authors to the technical flaws and poor management of the international gold standard, which a majority of the world’s countries adopted (or returned to) during the latter part of the 1920s.¹

      The evidence for the culpability of monetary factors in general, and the gold standard...


    • Five The Cyclical Behavior of Industrial Labor Markets: A Comparison of the Prewar and Postwar Eras
      (pp. 163-205)

      This paper compares the cyclical behavior of a number of industrial labor markets of the prewar (1923–39) and postwar (1954–82) eras. The methodology follows that of the traditional Burns and Mitchell (1946) business cycle analysis in at least two ways. First, the data employed are relatively disaggregated (we use monthly data at the two- or three-digit industry level). Second, we have not formulated or tested a specific structural model of labor markets during the cycle but instead concentrate on measuring qualitative features of the data. As did Burns and Mitchell, we see descriptive analysis of the data as...

    • Six Employment, Hours, and Earnings in the Depression: An Analysis of Eight Manufacturing Industries
      (pp. 206-246)

      Seismologists learn more from one large earthquake than from a dozen small tremors. On the same principle, the Great Depression of the 1930’s would appear to present an important opportunity for the study of the effects of business cycles on the labor market. In no other period for which we have data do output, labor input, and labor compensation exhibit such severe short-run variations.

      Despite this apparent opportunity, modern econometric analyses of labor markets have typically made little use of pre-World War II data. There are some significant exceptions. In the class of papers that assume continuous labor market equilibrium,...

    • Seven Unemployment, Inflation, and Wages in the American Depression: Are There Lessons for Europe?
      (pp. 247-254)

      Analysts of the contemporary European unemployment problem (Robert J. Gordon, 1988, being the most recent) have with some frequency drawn comparisons with the experience of the 1930s. In one sense, this comparison is unwarranted: While today’s European unemployment is a serious matter, its impact on human welfare is an order of magnitude less than what was wrought by the Great Depression. From a scientific perspective, however, the possibility that analogous mechanisms generated persistent unemployment in the 1930s and the 1980s makes the comparison an interesting one.

      In this paper, we consider whether the American experience of the 1930s can teach...

    • Eight Procyclical Labor Productivity and Competing Theories of the Business Cycle: Some Evidence from Interwar U.S. Manufacturing Industries
      (pp. 255-275)

      Since its discovery by Hultgren (1960), the procyclical behavior of average labor productivity, also known as short-run increasing returns to labor (SRIRL), has achieved the status of a basic stylized fact of macroeconomics. The ubiquitous nature of procyclical productivity has been confirmed by studies at levels of aggregation ranging from the firm to the national economy, and for a variety of countries and sample periods.

      Much of the original research on procyclical productivity was undertaken during the 1960s and early 1970s, contributions being made by Brechling (1965), Kuh (1965), Ball and St. Cyr (1966), Solow (1968), Fair (1969), and Sims...

    • Nine Nominal Wage Stickiness and Aggregate Supply in the Great Depression
      (pp. 276-302)

      The problem of explaining why the world economy collapsed in the 1930s has provided a difficult challenge to economists for more than six decades. Thus, it is particularly exciting that in the last few years there has developed something of a new consensus about the sources of the Great Depression. The distinctive claim of this emerging view—which is based on the research of a number of scholars and has been given an authoritative treatment by Eichengreen [1992]—is that the proximate cause of the world depression was a structurally flawed and poorly managed international gold standard.

      A brief synopsis...

  7. Index
    (pp. 303-310)