Underconsumption theories and Keynesian economics. Interpretations of the Great Depression

Underconsumption theories played an important part in the economic policy debates during the Great Depression of the 1930s. The commonsense appeal of the arguments and the clear cut policy advice secured their proponents' popular support. Here, the contributions of John A. Hobson, Emil Lederer, Waddill Catchings and William Foster are analyzed. The background to their thinking in terms of the economic policy debates in the respective countries is discussed and compared. Switzerland is an interesting case in this context since there underconsumption arguments were the only arguments used to challenge the orthodoxy of balanced budgets with the demand for active government policies. In evaluating the contributions discussed here with regard to the innovations of Keynes' General Theory on the one hand, the tradition of classical political economy on the other, it is argued that although underconsumptionists share certain concerns with Keynes's analysis, central theoretical notions are carried over from classical economics.