Economist Theories Post the Great Depression Essay

1104 Words Dec 6th, 2013 5 Pages
Theories post the great depression – attempts to explain the cause
The causes of the Great Depression are innumerable. There is no single cause that stands out as the sole reason of this historical event that turned the world on its head. Economists have presented many views and with plenty of plausible economic theories presented, there is no clear winner.
The reason for the Great Depression has been researched by economists many times in order to prevent it from happening ever again. There were many theories presented; many discarded. Now, in our present age, the list of theories that explain why the Great Depression became so popular and depressing has been narrowed now to a few main theories other than the Keynesian and Monetarist
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He was a proponent of keeping wages up since he believed that if people had high wages they would spend enough to overcome the Depression. This did work fairly well until 1931. There were other theories as well, some of the main ones are described in detail below:
Austrian School's theory
One of the explanations of what caused the Depression came from the Austrian School of Economics. In the year 1963, the Rothbard brothers (Hayek and Murray) wrote a book called, America's Great Depression. The theory framed by them pointed out the fact that the Depression was not caused by the crash in the stock market and paucity of money in 1929, but the market boom in the initial parts of 1920's. In their opinion, the volatility of the excess money supply in these years was the prime reason for the market to crash in 1929.
Additionally, Rothbards criticized Friedman's theory which claimed that the Great Depression was caused due to the fact that the Federal Bank did not have enough money supply. There was a war-of-the-economists going on.

Inequality and under consumption
Waddill Catchings and William Trufant Foster observed that companies were creating far more supply than what was being demanded. The main cause for this was that consumers did not have sufficient income. This kept continuing uncorrected, and caused a great divide between the rich and the poor. The unending balanced scale

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