Professor Richard Vedder on the Great Depression
I will go to my death believing the single most important factor in causing the Great Depression was discoordination in labor markets (too high wages) caused in large part by government policies such as the Hoover-Roosevelt high-wage-policy.
The thesis that the Great Depression was caused by aggressive government intervention in labor markets was first articulated by Murray Rothbard over fifty years ago and more recently was advanced by UCLA macroeconomist Lee Ohanian. Vedder’s work in this area also lent powerful support to Rothbard’s position. The Rothbardian position stands in direct opposition to the prevailing view that the Great Depression was generated by the Fed’s deflationary policies in the early 1930s. The latter view was originally proposed by Milton Friedman and Anna Schwartz and today is held by everyone from Ben Bernanke to nominal GDP targeters such as Scott Sumner.