Quarterly Journal of Austrian Economics

Volume 13, Number 3 (Fall 2010)

Rothbard (1963) provides a compelling explanation of the Great Depression. He used the Austrian business cycle theory to show that the inflationary policies of the Federal Reserve caused a boom in the economy of the 1920's that led to a bust in 1930. He then employed the Austrian theory of interventionism to show that Hoover’s policies were highly interventionist and caused the depression to be “great.” The combination of theories can be used to explain the stagflation of the 1970s, Japan’s lost decade of the 1990s, and the current economic crisis, which is now the longest contraction since the Great Depression. Like Hoover, George W. Bush had a reputation as an advocate of laissez faire policy. However, he presided over a massive expansion in the size of government and deployed highly interventionist policies to address the crisis.