Leon H. Keyserling, American Keynesian

The latter part of the 1920s was a period of economic instability and speculation, especially in the stock market. This period has been analyzed by John Kenneth Galbraith in The Great Crash (1954), with its Keynesian and Post Keynesian implications concerning economic instabilities and uncertainties. Earlier, the works of Alvin Hansen are of interest, especially after his conversion from a neoclassicist to a Keynesian (Brazelton 1993). As a Keynesian in the 1930s, Hansen developed what became a “stagnation theory” (Hansen 1939; Brazelton 1961, 1989), a thesis that was Keynesian but had historical and institutional underpinnings. Basically, to Hansen, the American economy had stagnated in the 1930s because, in the 1920s, its three historical growth elements had declined simultaneously: The rate of population growth from a high birth rate and high immigration declined, the rate of new technology declined, and the geographic frontier in the West had ended in the 1890s. A critic might ask why, if the frontier had ended in the 1890s, investment therein would continue until the 1930s. One reply correctly pointed out that capital accumulation on the East Coast of the United States was invested in the growing cities of the American West and Midwest—Kansas City, St. Louis, Oklahoma City, Omaha, and others—which absorbed eastern capital until the late 1920s.