Chapter 17: The Great Depression in Irving Fisher's Thought
17. The Great Depression in Irving Fisher’s thought Giovanni Pavanelli* INTRODUCTION The Great Depression was, without doubt, a watershed in contemporary economic thought: Keynes’ General Theory can be read in large part as a sophisticated intellectual eﬀort to explain and counteract this unprecedented downturn in economic activity. Nevertheless, major debates and controversies notwithstanding, we are still far from having a complete explanation of this event. The stock market crash of October 1929 and its connection with the subsequent severe contraction of real output have also been the object of conﬂicting interpretations. During the past decade, however, considerable progress has been made. Research, which was traditionally centred on the events internal to the United States, has now broadened in scope and stresses such factors in the spread and worsening of the Depression as the gold standard and the related rules of the game on the one hand and the First World War’s legacy of overall indebtedness and reciprocal mistrust and rivalry on the other (Eichengreen, 1992; Temin, 1993). Some recent studies have focused on the eﬀects of the fall in prices on the ﬁnancial stability of households and ﬁrms (debt–deﬂation eﬀects: cf. Bernanke and Gertler, 1990; King, 1994; Wolfson, 1996). In this framework, a growing number of studies have taken up the theoretical contribution and policy proposals of Irving Fisher (cf. Barber, 1996, 1999; Dimand, 1994, 1995; Steindl, 1995, 1999). Fisher, who is considered the leading American economist of the twentieth century, was also one...
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