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Wednesday, May 6, 2009

Did FDR Make the Depression Great?

By David Gordon for Mises.org:

[The Politically Incorrect Guide to the Great Depression and the New Deal. By Robert P. Murphy. Regnery, 2009. 199 pages.]

Robert Murphy demonstrates in this excellent book a penetrating ability to explain the essence of fallacious economic doctrines. As he notes, three theories offer competing explanations of the Great Depression: the Keynesian account, which stresses a lack of aggregate demand; Milton Friedman's monetarism, which ascribes the severity of the early years of the Depression to a drastic cut in the money supply by the Fed; and, of course, the Austrian theory that Murphy himself favors.

Herbert Hoover, though not under Keynes's influence, defended a version of the first theory. If wages were not kept high, purchasing power would be insufficient to restore prosperity.

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