Did Capitalism Cause the Great Depression?
Lionel Robbins’s The Great Depression (Macmillan, 1934) is one of the great economic works of our time. Its greatness lies not so much in originality of economic thought, as in the application of the best economic thought to the explanation of the cataclysmic phenomena of the Great Depression. This is unquestionably the best work published on the Great Depression.
At the time that Robbins wrote this work, he was perhaps the second most eminent follower of Ludwig von Mises (Hayek being the first). To his work, Robbins brought a clarity and polish of style that I believe to be unequalled among any economists, past or present. Robbins is the premier economic stylist.
In this brief, clear, but extremely meaty book, Robbins sets forth first the Misesian theory of business cycles, and then applies it to the events of the 1920s and 1930s. We see how bank credit expansion in the United States, Great Britain, and other countries (in Britain generated because of the rigid wage structure caused by unions and the unemployment insurance system, as well as a return to the gold standard at too high a par; and in the United States generated by a desire to inflate in order to help Britain as well as an absurd devotion to the ideal of a stable price level) drove the civilized world into a great depression.
Then Robbins shows how the various nations took measures to counteract and cushion the depression that could only ma
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