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Did Hayek and Robbins Deepen the Great Depression?

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  • LAWRENCE H. WHITE

Abstract

Contrary to some accounts, the Hayek–Robbins (“Austrian”) theory of the business cycle did not prescribe a monetary policy of “liquidationism” in the sense of passive indifference to sharp deflation during the early years of the Great Depression. There is no evidence that Hayek or Robbins influenced any “liquidationist” in the Hoover administration or the Federal Reserve System. Federal Reserve policy during the Great Depression was instead influenced by the real bills doctrine, which (despite some apparent similarities) was diametrically opposed in key respects to Hayek's norms for central bank policy.

Suggested Citation

  • Lawrence H. White, 2008. "Did Hayek and Robbins Deepen the Great Depression?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(4), pages 751-768, June.
    • Handle: RePEc:wly:jmoncb:v:40:y:2008:i:4:p:751-768
    DOI: 10.1111/j.1538-4616.2008.00134.x
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