|Author(s):||Parker, Randall E.|
Published by EH.Net (April 2003)
Parker, Randall E., Reflections on the Great Depression. Northampton,
MA: Edward Elgar, 2002, xii + 230p., ISBN: 1-84064-745-0.
Reviewed for EH.Net by Gene Smiley, Marquette University.
The Great Depression of the 1930s was the most dramatic episode of the
twentieth century. Many, though not all, would describe it as the “defining
moment” of the century. It changed the conception of and the role of government
in economies and it gave rise to modern macroeconomics. Many would argue that
nothing was quite the same after the 1930s. But each passing year takes us
further away from the “depression decade” and leaves fewer and fewer people who
lived through the traumatic period. Furthermore, the economists who matured in
and were shaped by those turbulent times are now the elder statesmen of the
profession and are increasingly passing on.
In 1997 and 1998 Randall E. Parker, an economist at East Carolina University
who has written extensively on the Great Depression, conducted interviews with
eleven legendary economists to obtain their reflections on this critical
period. All of those economists were in graduate school or received their
doctoral degrees during the 1930s. By the time the project was underway several
of the prominent economists Parker had hoped to interview had passed away.
These were Lester Chandler, Martin Bronfenbrenner, and Gottfried Haberler.
Several economists that he did interview — Moses Abramovitz, Albert Hart,
Wassily Leontif, and Herbert Stein — have passed on since his interviews. The
other economists interviewed were Paul Samuelson, Milton Friedman, Charles
Kindleberger, Anna Schwartz, James Tobin, Morris Adelman, and Victor Zarnowitz.
Some of these noteworthy economists have written extensively on the Great
Depression while others have specialized on quite different economic issues.
There are no major surprises revealed in the interviews, though the reader does
get some insight into the personal histories of these economists. In his
foreword, Ben Bernanke suggests that one of the achievements of the book is
“first-rate highbrow gossip” which seems to be an apt description.
Noting the lack of consensus on the causes, depth, and length of the Great
Depression Parker chose to begin the volume with a chapter overviewing the
decade. After briefly surveying the sequence of events, he examines some
contemporary and modern explanations such as “The Monetary Hypothesis,” “The
Nonmonetary/Financial Hypothesis,” and “The Gold Standard Hypothesis.” He
concludes this chapter with a brief discussion of the recovery and the New Deal
and the emergence of Keynes and his hypotheses.
The interviews provide no startling revelations or profound insights. Neither
do they suggest that economists as different as Paul Samuelson and Milton
Friedman have altered their long-held views on how one can explain the Great
Depression. These eleven economists were not equally affected by the Great
Depression and it did not always play a crucial role in their careers and
decisions. For Samuelson the Great Depression helped lead him into economics,
and Keynes’ General Theory had a great effect on his career once he accepted
its ideas. Milton Friedman chose economics because in the middle of a major
depression it was a much more “urgent” field of study than mathematics.
Interestingly, as a leading proponent of free markets and minimal government,
Friedman notes that the New Deal was a “God-send” for economists because the
government employed so many of them. Friedman also notes that if he were to
rewrite “The Great Contraction” chapter from A Monetary History he would
place considerably more emphasis on France’s role in bringing on the
international depression. Anna Schwartz commented that she now would place less
confidence in deposit insurance than she and Friedman did when writing the
chapter on “The Great Contraction.”
Harvard doctoral students were among the first to preview Keynes’ The
General Theory and there was a fairly rapid conversion to his views among
the students. Moses Abramovitz reports that as graduate students and
instructors read the galley proofs of the American version of The General
Theory, they made life miserable for Harvard’s professors and it was they
who converted Alvin Hansen from a critic of Keynes to a leading Keynesian
economist in the United States. There are many other interesting stories in the
book, such as Albert Hart’s experiences in Austria and Europe at the time of
the Kreditanstalt collapse and Britain’s exit from the gold standard.
Inevitably in a set of interviews such as these, the quality, length, and
topics discussed will vary considerably between interviews. To control for this
Parker asked similar questions of most of the economists interviewed. These
questions included: What ended the Great Depression? Does the memory of the
Great Depression stay with you today? Could it happen again? What was the
role of the Great Depression in shaping your thinking and career? What are the
lessons of the Great Depression? Are there parallels between the depression of
1920-1921 and 1929-1933? Other questions such as, should the Fed be an arbiter
of security prices, do the trends in the distribution of income bother you, did
the depression change the psychology of the country, and did Keynes have
“saving capitalism” as an objective in writing The General Theory, were
asked of several of the interviewees.
Though the answers to these questions varied there were some common responses.
Most concluded that World War II brought us out of the depression decade.
However, Friedman suggested that it was the Fed’s printing of money to finance
government armament expenditures that did so — not simply the government
spending. Anna Schwartz mentioned the growth of the money supply up to the
depression of 1937-1938 and never mentioned World War II. None of the
economists interviewed thought that a repeat of the Great Depression was much
of a possibility, though most did not rule out the possibility completely.
James Tobin thought that a repeat was unlikely but noted that recent events in
Japan had shaken his confidence in such a conclusion.
This is an interesting and well-written book. It provides additional insights
into the thinking and personalities of some of the leading economists who came
out of the most depressed decade in modern times. It provides additional
reading for study in both economic history and the history of economic
analysis, and I heartily recommend it.
Gene Smiley is a professor of economics at Marquette University. His most
recent book is Rethinking the Great Depression: A New View of Its Causes and
|Subject(s):||Macroeconomics and Fluctuations|
|Geographic Area(s):||North America|
|Time Period(s):||20th Century: Pre WWII|