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Learn the Austrian Take on the Great Depression

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Tags EducationFree MarketsBusiness CyclesInterventionism

11/14/2012Robert P. Murphy

I am pleased to announce that on November 16 we begin my new Mises Academy online class The Economics of the Great Depression. This will be a five-week course for only $59 that will cover the classical gold standard, the boom and crash of the 1920s, the policies of the Hoover administration, the cartel policies of the New Deal, and the myth of wartime prosperity. The course will focus more on economic arguments from different schools of thought, versus historical treatments. All reading material will be provided for free, though students would certainly benefit from obtaining my book on the Great Depression and New Deal. After the five-week course, the student will have a solid command of the Rothbardian position regarding this crucial episode in US economic history.

The Scope of the Course

The weekly lectures will run from November 16 through December 14. The first week will provide a background overview of the classical gold standard, as well as Calvin Coolidge's fiscal policies. We will see that the modern habit of blaming the gold standard for the Great Depression — common among Keynesians but also Friedmanite monetarists — makes little sense.

In week two we will tackle the crucial question of the Federal Reserve's culpability. The assigned readings will (of course) include large selections from Murray Rothbard's book America's Great Depression, which blames the Fed for an unsustainable credit boom in the 1920s. Yet we will also cover the Friedman/Schwartz hypothesis, that it was the Fed's inaction (or tight money) in the late 1920s and early 1930s that was ultimately responsible for the Depression.

In the third and fourth weeks we will explore the policies of the Hoover and Roosevelt administrations, noting their similarities. In addition to the treatment given by Rothbard, we will review the modern work by UCLA economists who analyze the New Deal as a cartel.

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Finally, in the fifth week we will consider the Keynesian theories that the "double dip" depression in 1937–38 can be attributed to premature fiscal austerity, and that the ultimate solution to the Great Depression came in the form of military spending on World War II. Here we will rely on the revisionist work of Bob Higgs, but also the anecdotal descriptions of civilian life published more recently by Steve Horwitz and Michael McPhillips.

Throughout the course, the lectures will point students to quantitative evidence to back up the qualitative arguments being presented. For example, the monetarist explanations for the severity of the Great Depression will be analyzed with the even-larger drop in money stock and prices during the depression of 1920–21, while the Keynesian focus on deficit spending will be difficult to square with Hoover's fiscal record. .

Structure of the Course

In a typical week of the course, I will give a live video broadcast on Friday from 5:30 to 7:00 p.m., eastern time. I will spend the first 75 minutes lecturing on that week's material, and then I will field questions from students for the remaining 15 minutes. In addition, on Saturday I will have "office hours" at a varying time of day (in order to cater to different students each week), meaning that I will be available on a live video broadcast to answer questions from any students who tune in.

Note that the Saturday sessions are purely for the students' convenience and are not mandatory. Also, all broadcasts will be recorded and available to enrolled students, so that people who have a scheduling conflict can still take the class if they wish.

If a student wishes, he or she can simply audit the class. This has been a popular option for many adults who take Mises Academy classes to watch the lectures but, because of their work schedules, can't keep up with the reading.

However, students may also take the class for a grade. These students will take a multiple-choice quiz each week, in addition to a final exam. Although the Mises Institute is not accredited, we will present certificates of completion and a formal grade at the end of the class to those students who desire it. Homeschooling parents in particular may decide that their child will receive excellent instruction on the Depression and its aftermath through this class.


The alleged "lessons" from the Great Depression to this day continue to be used to justify ever-bigger government deficits and monetary expansion by the Fed. This pattern holds not just for Keynesians such as Paul Krugman but also for "market monetarists" such as Scott Sumner. Many economists across the conventional left-right spectrum buy into the myths that the gold standard proved fatal during the 1930s and that Herbert Hoover showed the danger of austerity policies. Worst of all, commentators still repeat the claim that it was World War II that finally "got us out of the Depression."

The student who completes my five-week course will learn the Austrian responses to such claims. As we will see, the raw facts line up with common sense: massive deficits and monetary inflation, let alone a world war, are not the paths to economic recovery. The lessons from the Great Depression are needed today, but only the Austrians know the right lessons.

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