I came across this paper by Lee Ohanian of Minneapolis Fed , who has done some great work on Great Depression. The paper is a review of this book – The Defining Moment (free to download chapetrwise)- written on Great Depression by various economists and edited by Michael D. Bordo, Claudia Goldin, and Eugene N. White.
The abstract of the paper is quite interesting and apt for today’s times:
This paper reviews The Defining Moment, edited by Michael D. Bordo, Claudia Goldin, and Eugene N. White. The volume studies how the Great Depression changed government policies, including changes in monetary policy, fiscal policy, banking policy, agricultural policy, social insurance, and international economic policy.
I argue that a theory of policy evolution is required to answer how the Great Depression affected these policies. In the absence of this theory, the contributors provide insight into the question by showing how policies changed sharply in the 1930s with little or no historical precedent or by showing how policies were tied to political or other considerations unique to the period.
While this volume doesn’t always provide answers to the questions posed, it does raise a fundamental issue in the analysis of government policy: Why during some crisis periods are bad policies adopted, whereas during other periods, they are not?
I am yet to read the book but looks very interesting. Ohainian points that book looks at experiments to identify would govt polices would have been different now if Great Depression had not occur ed? Along with Great Depression there were multiple events like World War I followed by World War II, Rise of Nazi Germany etc so one can never be sure of whether polices were because of depression or not.
Some interesting answers are there as for instance what would have been the international monetary system if no great depression? Eichengreen and Bordo say the gold exchange standard would have reemerged but would not have survived because of inadequate gold reserves. As this happened after great depression as well, Great Depression has not changed the monetary system much. Very interesting indeed.
Then we learn that US had a policy called NIRA which allowed cartels to form across business sectors. There were things like quotas, minimum prices etc .
A similar thing is likely to be asked after this crisis as well. It is going to be a big event-study for economists going ahead. Infact, we can just see what bad policies were adopted then to avoid the same now. This book looks like providing quite a few examples of the bad policies and issues to ponder about.