Did Hayek and Robbins Deepen the Great Depression?

Contrary to some accounts, the Hayek-Robbins (“Austrian”) theory of the business cycle did not prescribe a monetary policy of “liquidationism” in the sense of passive indifference to sharp deflation during the early years of the Great Depression. There is no evidence that Hayek or Robbins influenced any “liquidationist” in the Hoover administration or the Federal Reserve System. Federal Reserve policy during the Great Depression was instead influenced by the real bills doctrine, which (despite some apparent similarities) was diametrically opposed in key respects to Hayek’s norms for central bank policy

PDF

___

Bernanke, Ben S. (2004). “Money, Gold, and the Great Depression.” H. Parker Willis Lecture in Economic Policy, Washington and Lee University, Lexington, Virginia (March 2). http://132.200.33.130/boarddocs/Speeches/2004/200403022/default.htm
Caballero, Ricardo J., and Mohamad L. Hammour. (1994). “The Cleansing Effect of Recessi- ons.” American Economic Review 84, 1350-1368.
Caballero, Ricardo J., and Mohamad L. Hammour. (2005). “The Cost of Recessions Revisi- ted: A Reverse-Liquidationist View.” Review of Economic Studies 72, 313–341.
Caldwell, Bruce. (2004). Hayek’s Challenge: An Intellectual Biography of F.A. Hayek. Chicago: University of Chicago Press.
DeLong, J. Bradford. (1991). “Liquidation Cycles and the Great Depression.” Working pa- per, Harvard University and NBER, 1991. http://econ161.berkeley.edu/pdf_files/Liqu- idation_Cycles.pdf
DeLong, J. Bradford. (1998). “Fiscal Policy in the Shadow of the Great Depression.” In The Defining Moment: The Great Depression and American Economy in the Twentieth Century, edited by Michael D. Bordo, Claudia Goldin, and Eugene N. White, pp. 67-85. Chicago: University of Chicago Press.
DeLong, J. Bradford. (undated). “Friedrich A. von Hayek.” http://www.j-bradford- delong. net/Economists/hayek.html
Eichengreen, Barry. (1999). “The Keynesian Revolution and the Nominal Revolution: Was There a Paradigm Shift in Economic Policy in the 1930s?” UC Berkeley working paper (March). http://www.econ.berkeley.edu/~eichengr/research/castronov.pdf
Epstein, Gene. (1999). “Mr. Market [Interview with Milton Friedman].” Hoover Digest, no. 1. http://www.hooverdigest.org/991/epstein.html
Garrison, Roger W. (1986). “Hayekian Trade Cycle Theory: A Reappraisal.” Cato Journal 6, 437-53.
Garrison, Roger W. (2006). “From Keynes to Hayek: The Marvel of Thriving Macroecono- mies.” Review of Austrian Economics 19, 5-15.
Haberler, Gottfried. (1932). “Money and the Business Cycle.” Reprinted in Ludwig von Mi- ses et al., The Austrian Theory of the Trade Cycle and Other Essays, compiled by Richard Ebeling. Auburn: Mises Institute, 1996.
Haberler, Gottfried. (1986). “Reflections on Hayek’s Business Cycle Theory.” Cato Journal 6, 421-35.
Hayek, Friedrich A. (1932). “The Fate of the Gold Standard.” In Money, Capital, and Fluctu- ations, ed. Roy McCloughry (Chicago, IL: University of Chicago Press, 1984), 118-135.
Hayek, Friedrich A. (1933a). Monetary Theory and the Trade Cycle, translated by N. Kaldor and H. M. Croome. London: Cape.
Hayek, Friedrich A. “Saving” (1933b). Reprinted in Hayek, Profits, Interest and Investment. London: Routledge, 1939.
Hayek, Friedrich A. (1933c). “The Present State and Immediate Prospects of the Study of Industrial Fluctuations”. Reprinted in Hayek, Profits, Interest and Investment. London: Routledge, 1939.
Hayek, Friedrich A. Prices and Production, 2nd ed. (1935). London: Routledge.
Hayek, Friedrich A. Monetary Nationalism and International Stability. (1937). London: Long- mans, Green.
Hayek, Friedrich A. A Discussion with Friedrich A. von Hayek. (1975). Washington, DC: Ame- rican Enterprise Institute.
Hoover, Herbert. (1952). The Memoirs of Herbert Hoover, Vol. Three: The Great Depression 1929-1941. New York: Macmillan.
Humphrey, Thomas M. (1982). “The Real Bills Doctrine.” Federal Reserve Bank of Rich- mond Economic Review 68, 3-13.
Humphrey, Thomas M. (2001). “The Choice of a Monetary Policy Framework: Lessons from the 1920s.” Cato Journal 21, 285-313.
Johnston, Louis D., and Samuel H. Williamson. “The Annual Real and Nominal GDP for the United States, 1790 – Present.” Economic History Services, April 1, 2006. http:// eh.net/hmit/gdp/
Klausinger, Hansjorg. (1995). “Schumpeter and Hayek: Two Views of the Great Depression Re-examined.” History of Economic Ideas 3, 93–127.
Laidler, David. “Meltzer’s History of the Federal Reserve.” (2003a). Journal of Economic Lite- rature 41, 1256-71.
Laidler, David. “The Price Level, Relative Prices, and Economic Stability: Aspects of the Inter-war Debate.” (2003b). University of Western Ontario working paper. http://eco- nomics.uwo.ca/econref/WorkingPapers/researchreports/wp2003/wp2003_10.pdf
Love, Philip H. (1929). Andrew Mellon: The Man and His Work. Baltimore: F. Heath Coggins & Co.
Lutz, Friedrich A. (1968). The Theory of Interest. Chicago: Aldine.
Meltzer, Allan H. (2003). A History of the Federal Reserve, Vol. 1: 1913-1951. Chicago: Uni- versity of Chicago Press.
Mises, Ludwig von. (1980). The Theory of Money and Credit. Indianapolis: Liberty Press.
Parker, Randall, ed. (2002). Reflections on the Great Depression. Northampton, MA: Edward Elgar.
Robbins, Lionel. (1934). The Great Depression. London: Macmillan.
Robbins, Lionel. (1971). Autobiography of an Economist. London: Macmillan.
Robbins, Lionel. (1979). Against Inflation: Speeches in the Second Chamber, 1965-1977. Lon- don: Macmillan.
Robertson, D. H. (1926). Banking Policy and the Price Level: An Essay in the Theory of the Trade Cycle. London: P. S. King and Son.
Schwartz, Anna J. (1987). “Banking School, Currency School, Free Banking School.’’ In J. Eatwell,. M. Milgate, and P. Newman, eds., The New Palgrave: Dictionary of Economics (London: Macmillan).
Selgin, George. (1999). “Hayek versus Keynes on How the Price Level Ought to Behave.” History of Political Economy 31, 699-722.
Selgin, George, and Lawrence H. White. (1994). “How Would the Invisible Hand Handle Money?” Journal of Economic Literature 32, 1718-49.
Timberlake, Richard H., Jr. (1993). Monetary Policy in the United States: An Intellectual and Institutional History. Chicago: University of Chicago Press.
Timberlake, Richard H., Jr. (2007). “Gold Standards and the Real Bills Doctrine in U. S. Mo- netary Policy.” Independent Review 11, 325-54.
United States Treasury. (1931). Annual Report of the Secretary of the Treasury on the State of the Finances for the Fiscal Year Ended June 30, 1931. Washington, DC: U.S. Government Printing Office.
Wakatabe, Masazumi. (2005). “Was the Great Depression the Watershed of Macroecono- mics?: The Impact of the Great Depression on Economic Thought Reconsidered.” Wor- king paper. http://www.ires.ucl.ac.be/CONFERENCE/21_01_2005/Wakatabe.pdf
Wheelock, David C. (1991). The Strategy and Consistency of Federal Reserve Monetary Policy, 1924-1933. Cambridge: Cambridge University Press.
Wheelock, David C. (1992). “Monetary Policy in the Great Depression: What the Fed Did, And Why.” Federal Reserve Bank of St. Louis Review 74 (March), 3–28.
White, Lawrence H. (1995). Free Banking in Britain, 2nd ed. London: Institute of Economic Affairs.
White, Lawrence H. (1999). “Hayek’s Monetary Theory and Policy: A Critical Reconstruc- tion.” Journal of Money, Credit and Banking 31, 109-20.