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Type of bind: Hardcover
EAN num: 9780945466055
ISBN number: 0945466056
Label: Ludwig Von Mises Institute
Manufacturer: Ludwig Von Mises Institute
Quantity: 1
Page Count: 368
Printing Date: June 15, 2000
Publishing house: Ludwig Von Mises Institute
Sale Popularity Level: 3736
Studio: Ludwig Von Mises Institute
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Applied Austrian economics doesn't get better than this. Murray N. Rothbard's America's Great Depression is a staple of modern economic literature and crucial for understanding a pivotal event in American and world history.
The Mises Institute edition features, along with a new introduction by historian Paul Johnson, top-quality paper and bindings, in line with the standard set by The Scholars Edition of Human Action.
Since it very first appeared in 1963, it has been the definitive treatment of the causes of the depression. The book remains canonical yesterday because the debate is still very alive.
Rothbard opens with a theoretical treatment of business cycle theory, showing how an expansive monetary policy generates imbalances between investment and consumption. He proceeds to examine the Fed's policies of the 1920s, demonstrating that it was quite inflationary even if the effects did not show up in the price of goods and services. He showed that the stock market correction was merely one symptom of the investment boom that led inevitably to a bust.
The Great Depression was not a crisis for capitalism but merely an example of the downturn part of the business cycle, which in turn was generated by government intervention in the economy. Had the book appeared in the 1940s, it might have spared the world much grief. Even so, its appearance in 1963 meant that free-market advocates had their very first full-scale treatment of this crucial subject. The damage to the intellectual world inflicted by Keynesian- and socialist-style treatments would be limited from that day forward.
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Rated by buyers 
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We all understand that particular industries and markets may go through hard times at one point or another. But what causes an entire economy to flourish, only to contract at a later date? What causes the entire economy to misread the economic signs? What causes the entire economy to misforecast and make bad investments? What causes a "Cluster of Errors"?
It is hard to believe that anyone could casually discount Rothbard's analysis of the business cycle and the Great Depression given America's current struggle with a depressed housing market caused by the villian that Rothbard goes to great lengths to describe: Credit Expansion.
The fact that this book was written 40 years ago, and that it is just as applicable to today's market as it is to the market in 1929, adds to the intellectual weight and veracity of this work.
This is not a historical narrative, this is a book on economics. It very first explains Ludwig Von Mises theory concerning boom-bust business cycles as they are caused by loose Federal monetary policy and loose lending by banks. It then delves into the history of the Great Depression, applying the theory to the history. In terms of readability, I found the book very easy to read and very compelling. In terms of economic analysis I found Rothbard's arguments in favor of Mise's theories regarding the business cycle to be very thorough and convincing.
The Austrian School of Economics is not mainstream. Rothbard is not Friedman, and he is not Keynes. It is unfortunate that some reviewers were hoping to read an echo-chamber for Lord Keynes or Milton Friedman, and seemed to rate Rothbard based on how close Rothbard's theories and conclusions were to the theories and conclusions of their favorite economist.
It is also unfortunate that some of the reviewers were not expecting an economic analysis, but their false expectations should not reflect poorly on the author or his work.
Rated by buyers -
If we are talking about collectivist government privileges interfering with the sound functioning of a prosperous economy, Rothbard knows we can't start researching the Great Depression with Roosevelt's response to an economic collapse. Rather, there's not much to be said about him in this book.
Rather we look to some pretty non-traditional trends in government power. We go before WWI and the ensuing debt, and the resulting advantages in the world economy. Rothbard even goes into a history of America's previous depressions, which we don't hear about, and were all treated with an increased laissez-faire attitude. So we aren't given a "The Great Depression changed everything" theory of unsound economics, just like in foreign policy "9/11 changed everything". In the 1900's, we get a slew of "progressive" government interference with markets. This is not only the FED, but the income tax (reaching 79% in the middle of the depression), union privilege, increased government spending, removing domestic links between the dollar and gold, "protectionist" tariff hikes, price controls, and eventually a mix of fascism and socialism.
Part of what Democrats don't like to hear is that Roosevelt was personally complemented by Hitler and Mussolini on his fascist economic system. Eventually America would "solve" its depression the same way Italy and Germany did - nationalism for war and increased military spending.
But part of what Republican's don't like to hear is that Hoover started the New Deal, which Rothbard shows is what prevents the economy from recovering as it did in all previous depressions. Hoover supported wage controls in a deflating economy, forcing unemployment, which many people believe WAS the defining characteristic of the depression. Others believe it was the stock market crash. But any quick glance at the changes of money supply shows why prices had to do what they did. In an environment of artificially loose credit created by expanding the money supply, the ability to pay loans and make profitable loans, or even any long-term fixed rate contract, depends upon prediction of the central figures who determine how loose credit will be. Even a small change at the government and FED level can cause a sizeable bust.
Many hold "speculation" accountable, saying that the rampant gains of capitalism spurred this reckless speculation. Well, what could be more recklessly speculative than a small group of men trying to set a monetary policy that would simultaneously create massive credit and consumerism? To function properly, the market would have to speculate the decisions of these people, who were trying to speculate the market. There's your excess speculation, which doesn't happen with sound money.
Rothbard gives a lengthy and powerful description of the Austrian Theory of the Business Cycle, which Hayek would eventually win a Nobel Prize for. Also, Higgs shows how the depression could have been considered to last until 1946, if you don't believe that military production bought with debt indicates a good economy. Keynesian and military-keynesian approaches to solving depressions took almost 20 years to fix after an inflationary boom of 8 years.
I recommend this book to anyone interested in a mixture of government policy and the economics behind the Great Depression. It contains well-written arguments and factual numbers to support them. It is not hard to read, although it will read easier if you know a thing or two about economics. Rothbard shines in being able to speak in clear and simple terms while delivering powerful arguments that anyone should be able to grasp.
I do not recommend this book to anyone who is dead-set upon socialism or fascism; however, if you haven't heard of the Austrian Business Cycle Theory to explain the Great Depression, you cannot be dead-set upon those principles. Take the time to read this book. Rational debate requires complete knowledge of opposition viewpoints.
I would supplement this book with other literature from Mises, as well as study the financial situation of Japan in the 90's.
Rated by buyers 
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Murray Rothbard's book, America's Great Depression, is really two books in one. One is a very bad book. It purports to use economic tools to explain how the Great Depression came to be. The other is a potentially very good book. What is suggests is that Herbert Hoover, although well intended, engineered a bad situation into a catastrophe. Overall, I do not recommend the book to the general public as having a good explanation of why events of the 1920s led to the Great Depression, nor would I recommend it to the general public as an exemplar of good economic thinking. But I do recommend it to my fellow economists as an exemplar of how not to do economics.
The bad book occupies the introductions to each of Rothbard's five editions of the book (the last published posthumously, and with an introduction by Paul Johnson), and then the very first six chapters. From those introductions, it is apparent that Rothbard was a follower of Ludwig von Mises' Austrian school of economic "thinking," a school that apparently believes, economics can be a fact-free science. That can be seen in Rothbard's Introduction to the First Edition where he wrote (xxxix f.): "... I make no pretense of using the historical facts to "test" the theory. On the contrary, I contend that economic theories cannot be 'tested' by historical or statistical fact. ... The only test of a theory is the correctness of the premises and the logical chain of reasoning." If that is indeed the Misesian-school's thinking, I question what kind of theory and what kind of economics can be produced by its fact-free science. Unlike Athena and Zeus, truth cannot spring from von Mises' head unvarnished by observation, and it cannot do so from anyone else's head for that matter. After all, how did von Mises very first get to the theory he proposed, and Rothbard used, without actually having observed facts on the ground. In the end, truth needs recourse to facts and observations, and to refutable hypotheses. It is the scientist's task to tease the evidence, or lack thereof, from recalcitrant facts and observations for the hypothesis or theory being proposed. Absent that, all one is left with is fact-free science, which is no science at all. It is simply assertion papered over by an ideological just-so story. In that regard, the Misesian-school appears to be no better than the Marxian school (although ideologically, the polar opposite). If Rothbard represented the Misesian-school accurately, I would dismiss that school's approach as being theory without measurement, in the same way, as in my graduate days, that we dismissed measurement without theory.
To show how misleading fact-free science can be, I recall a famous story about Albert Einstein and quantum mechanics. Einstein, using a thought experiment in 1935 (the so-called EPR paradox) had proposed a seemingly irrefutable test about particles in quantum mechanics. The paradox was impossible to test with the equipment available at the time, and so stood for quite a while. Only in the 1970s and later, with the advent of high-energy cyclotrons, did the paradox become testable and indeed was refuted.
Of course, Rothbard's book is not entirely fact-free. He did use some historical facts to 'test' the theory, or at a minimum, to demonstrate its validity. He did that despite his contention that economic theories cannot be "tested" by historical or statistical fact. I find the difference between what he said he would not do and what he did to be most puzzling.
Rothbard's book, in its very first part, contains much that was ill defined, seemingly inconsistently defined, or downright misleading. Also, there seems to have been too narrow a focus on component parts, coupled with a unwillingness to look at larger and possibly more pertinent aggregates. The book has other areas of confusion as well, but those are of less import, and I will skip them in the interest of brevity.
In Chapter 1 of the book, we come across the very first of Rothbard's confusing and ill-defined terms. It is in the context of the hypothesis he sets as to the economic theory behind what caused the Great Depression. According to Rothbard, the hypothesis depends on von Mises' view that bank credit expansion will lead to a series of investment errors that turn out to be "malinvestment in higher-orders of production." One can ask, what are "higher-order of production"? Rothbard definition was: investment in capital-goods "most remote from the consumer"(10). What does that mean? Can one consider investment in farmland, a form of capital, as investment in a higher-order of production, insofar as farmland can be pretty remote from the consumer? I doubt that is what Rothbard had in mind. The subsequent question is, what is "malinvestment," and how does it lead to a downturn in the economy? As to the question's very first part, what is the definition of malinvestment, frankly, it was never clear to ... Read More
Rated by buyers -
The definitive scholarly analysis of why the Great Depression happened and the policy failures which tried to allievate its tragic consequences.
This is the seminal volume that launched Rothbard's reputation as the world-class expert on this issue.
His subsequent work related to the history of the Federal Reserve and its destructive monetary policy which formented the Depression cemented this important assessment.
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A remarkable application of the Austrian Business Cycle Theory to the most catastrophic (and very preventable) economic disaster in the history of the United States.
It's tragic that even today, despite all the contrary evidence, it is commonly believed that the Great Depression was a product of Capitalism gone wild (Worst spring break movie ever). Moreover, the fact that Hoover is considered to be a pro-free market, do-nothing eater of babies president is frankly disgusting (Well, at least I haven't read that he ate babies). Thank you Murray Rothbard for making available a sane interpretation of this unfortunate calamity.
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