IDEAS home Printed from https://ideas.repec.org/a/bla/ehsrev/v75y2022i2p297-335.html
   My bibliography  Save this article

History as heresy: Unlearning the lessons of economic orthodoxy

Author

Listed:
  • Mary A. O'Sullivan

Abstract

Unprecedented liquidity injections by central bankers have gained legitimacy in recent years to stave off economic crisis and enjoy strong support from prominent economists and economic historians. Such radical action by central bankers is underpinned by a remarkable agreement on a specific interpretation of the Great Depression of the 1930s in the US, an interpretation proposed by Milton Friedman and Anna Schwartz in A monetary history of the United States (1963). This article explores the origins, the limits, and the influence of A monetary history’s interpretation of the Great Depression for the insights it offers on theory and history in the study of economic life. The book was inspired by Wesley Clair Mitchell's mobilization of historical research to insist on the inherent instability of capitalism. Friedman and Schwartz exploited the heretical potential of historical research to dismiss any claim that the crisis reflected a systemic dysfunction of the US economy. Now that their interpretation has become our orthodoxy, this article shows how we can develop the fertile link between history and heresy to open up new lines of research on the causes of the greatest crisis in the history of capitalism.

Suggested Citation

  • Mary A. O'Sullivan, 2022. "History as heresy: Unlearning the lessons of economic orthodoxy," Economic History Review, Economic History Society, vol. 75(2), pages 297-335, May.
    • Handle: RePEc:bla:ehsrev:v:75:y:2022:i:2:p:297-335
    DOI: 10.1111/ehr.13117
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/ehr.13117
    Download Restriction: no
    File URL: https://libkey.io/10.1111/ehr.13117?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Robert J. Gordon, 2016. "The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War," Economics Books, Princeton University Press, edition 1, number 10544.
    2. repec:ucp:bkecon:9780226519999 is not listed on IDEAS
    3. Howard Sherman, 2001. "The Business Cycle Theory of Wesley Mitchell," Journal of Economic Issues, Taylor & Francis Journals, vol. 35(1), pages 85-97, March.
    4. Kaufman, Bruce E., 2017. "The Origins And Theoretical Foundation Of Original Institutional Economics Reconsidered," Journal of the History of Economic Thought, Cambridge University Press, vol. 39(3), pages 293-322, September.
    5. McCloskey, Donald N, 1983. "The Rhetoric of Economics," Journal of Economic Literature, American Economic Association, vol. 21(2), pages 481-517, June.
    6. Eichengreen, Barry, 2016. "Hall of Mirrors: The Great Depression, the Great Recession, and the Uses-and Misuses-of History," OUP Catalogue, Oxford University Press, number 9780190621070.
    7. Eichengreen, Barry, 1996. "Golden Fetters: The Gold Standard and the Great Depression, 1919-1939," OUP Catalogue, Oxford University Press, number 9780195101133.
    8. repec:cup:entsoc:v:19:y:2018:i:04:p:751-802_00 is not listed on IDEAS
    9. Wicker,Elmus, 1996. "The Banking Panics of the Great Depression," Cambridge Books, Cambridge University Press, number 9780521562614.
    10. Mirowski, Philip, 2002. "Cowles Changes Allegiance: From Empiricism to Cognition as Intuitive Statistics," Journal of the History of Economic Thought, Cambridge University Press, vol. 24(2), pages 165-193, June.
    11. McLeay, Michael & Radia, Amar & Thomas, Ryland, 2014. "Money creation in the modern economy," Bank of England Quarterly Bulletin, Bank of England, vol. 54(1), pages 14-27.
    12. Christina D. Romer, 1990. "The Great Crash and the Onset of the Great Depression," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(3), pages 597-624.
    13. Wesley Clair Mitchell, 1927. "Business Cycles: The Problem and Its Setting," NBER Books, National Bureau of Economic Research, Inc, number mitc27-1, May.
    14. Mayer, Thomas, 1978. "Money and the Great Depression: A critique of professor Temin's thesis," Explorations in Economic History, Elsevier, vol. 15(2), pages 127-145, April.
    15. Thomas M. Humphrey, 1987. "The theory of multiple expansion of deposits: what it is and whence it came," Economic Review, Federal Reserve Bank of Richmond, vol. 73(Mar), pages 3-11.
    16. Christina D. Romer & David H. Romer, 2013. "The Missing Transmission Mechanism in the Monetary Explanation of the Great Depression," American Economic Review, American Economic Association, vol. 103(3), pages 66-72, May.
    17. Bresnahan, Timothy F. & Raff, Daniel M. G., 1991. "Intra-Industry Heterogeneity and the Great Depression: The American Motor Vehicles Industry, 1929–1935," The Journal of Economic History, Cambridge University Press, vol. 51(2), pages 317-331, June.
    18. McCraw, Thomas K., 2006. "Schumpeter's Business Cycles as Business History," Business History Review, Cambridge University Press, vol. 80(2), pages 231-261, July.
    19. Lucia, Joseph L., 1985. "The failure of the bank of United States: A reappraisal," Explorations in Economic History, Elsevier, vol. 22(4), pages 402-416, October.
    20. Friedman, Milton & Schwartz, Anna J., 1986. "The failure of the bank of United States: A reappraisal : A reply," Explorations in Economic History, Elsevier, vol. 23(2), pages 199-204, April.
    21. Universities-National Bureau Committee for Economic Research, 1951. "Conference on Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number univ51-1, May.
    22. Charles P. Kindleberger, 1978. "Manias, Panics, and Rationality," Eastern Economic Journal, Eastern Economic Association, vol. 4(2), pages 103-112, April.
    23. Bordo, Michael D. (ed.), 1989. "Money, History, and International Finance," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226065939, December.
    24. Wheelock,David C., 2004. "The Strategy and Consistency of Federal Reserve Monetary Policy, 1924–1933," Cambridge Books, Cambridge University Press, number 9780521531399.
    25. Clavin, Patricia, 2015. "Securing the World Economy: The Reinvention of the League of Nations, 1920-1946," OUP Catalogue, Oxford University Press, number 9780198766483.
    26. Richardson, Gary, 2007. "Categories and causes of bank distress during the great depression, 1929-1933: The illiquidity versus insolvency debate revisited," Explorations in Economic History, Elsevier, vol. 44(4), pages 588-607, October.
    27. Milton Friedman, 1950. "Wesley C. Mitchell as an Economic Theorist," Journal of Political Economy, University of Chicago Press, vol. 58(6), pages 465-465.
    28. David Greasley & Jakob B. Madsen, 2006. "Investment and Uncertainty: Precipitating the Great Depression in the United States," Economica, London School of Economics and Political Science, vol. 73(291), pages 393-412, August.
    29. Martha L. Olney, 1999. "Avoiding Default: The Role of Credit in the Consumption Collapse of 1930," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 319-335.
    30. Robert J. Shiller, 2017. "Narrative Economics," American Economic Review, American Economic Association, vol. 107(4), pages 967-1004, April.
    31. Federico,Giovanni, 2009. "An Economic History of the Silk Industry, 1830–1930," Cambridge Books, Cambridge University Press, number 9780521105262.
    32. Harold L. Reed, 1932. "Distrust of Bank Deposits as Measured by Federal Reserve Note Issue," Journal of Political Economy, University of Chicago Press, vol. 40(1), pages 110-110.
    33. Abramitzky, Ran, 2015. "Economics and the Modern Economic Historian," The Journal of Economic History, Cambridge University Press, vol. 75(4), pages 1240-1251, December.
    34. Hammond,J. Daniel, 1996. "Theory and Measurement," Cambridge Books, Cambridge University Press, number 9780521552059.
    35. Jeff Biddle, 1996. "A Citation Analysis of the Sources and Extent of Wesley Mitchell's Reputation," History of Political Economy, Duke University Press, vol. 28(2), pages 137-169, Summer.
    36. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867–1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1, May.
    37. Clower, Robert W., 1964. "Monetary History and Positive Economics," The Journal of Economic History, Cambridge University Press, vol. 24(3), pages 364-380, September.
    38. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-276, June.
    39. Ran Abramitzky, 2015. "Economics and the Modern Economic Historian," NBER Working Papers 21636, National Bureau of Economic Research, Inc.
    40. Wesley C. Mitchell, 1922. "Annual Report of the Director of Research, February 6, 1922," NBER Books, National Bureau of Economic Research, Inc, number annu22-1, May.
    41. Michael D. Bordo, 1989. "Money, History, and International Finance: Essays in Honor of Anna J. Schwartz," NBER Books, National Bureau of Economic Research, Inc, number bord89-1, May.
    42. James Forder & Kardin Sømme, 2019. "Explaining the fame of Friedman’s Presidential Address," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 43(6), pages 1683-1700.
    43. Wesley C. Mitchell, 1922. "Annual Report of the Director of Research," NBER Chapters, in: Annual Report of the Director of Research, February 6, 1922, pages 1-9, National Bureau of Economic Research, Inc.
    44. Wicker, Elmus, 1980. "A Reconsideration of the Causes of the Banking Panic of 1930," The Journal of Economic History, Cambridge University Press, vol. 40(3), pages 571-583, September.
    45. Wesley Clair Mitchell, 1927. "Introductory pages to "Business Cycles: The Problem and Its Setting"," NBER Chapters, in: Business Cycles: The Problem and Its Setting, pages -23, National Bureau of Economic Research, Inc.
    46. Hausman, Joshua K., 2016. "What Was Bad for General Motors Was Bad for America: The Automobile Industry and the 1937/38 Recession," The Journal of Economic History, Cambridge University Press, vol. 76(2), pages 427-477, June.
    47. Hyman P. Minsky, 1976. "Did Monetary Forces Cause the Great Depression? by Peter Temin," Challenge, Taylor & Francis Journals, vol. 19(4), pages 44-46, September.
    48. Anne Mayhew, 1983. "Ideology and the Great Depression: Monetary History Rewritten," Journal of Economic Issues, Taylor & Francis Journals, vol. 17(2), pages 353-360, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Breitenlechner, Max & Mathy, Gabriel P. & Scharler, Johann, 2021. "Decomposing the U.S. Great Depression: How important were loan supply shocks?," Explorations in Economic History, Elsevier, vol. 79(C).
    2. Siklos, Pierre L., 2008. "The Fed's reaction to the stock market during the great depression: Fact or artefact?," Explorations in Economic History, Elsevier, vol. 45(2), pages 164-184, April.
    3. Peter Temin, 1998. "Causes of American business cycles: an essay in economic historiography," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 42(Jun), pages 37-64.
    4. Cortes, Gustavo S. & Taylor, Bryan & Weidenmier, Marc D., 2022. "Financial factors and the propagation of the Great Depression," Journal of Financial Economics, Elsevier, vol. 145(2), pages 577-594.
    5. Bruce E. Kaufman, 2018. "How Capitalism Endogenously Creates Rising Income Inequality and Economic Crisis: The Macro Political Economy Model of Early Industrial Relations," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 57(1), pages 131-173, January.
    6. Robert F. Bruner & Scott C. Miller, 2019. "The Great Crash of 1929: A Look Back After 90 Years," Journal of Applied Corporate Finance, Morgan Stanley, vol. 31(4), pages 43-58, December.
    7. Hogan, Thomas L. & White, Lawrence H., 2021. "Hayek, Cassel, and the origins of the great depression," Journal of Economic Behavior & Organization, Elsevier, vol. 181(C), pages 241-251.
    8. Hugh Rockoff, 2010. "On the Origins of A Monetary History," Chapters, in: Ross B. Emmett (ed.), The Elgar Companion to the Chicago School of Economics, chapter 7, Edward Elgar Publishing.
    9. Harrison, Sharon G. & Weder, Mark, 2002. "Did sunspot cause the Great Depression?," SFB 373 Discussion Papers 2002,35, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    10. Alexander J. Field, 2013. "The Interwar Housing Cycle in the Light of 2001-2011: A Comparative Historical Approach," NBER Working Papers 18796, National Bureau of Economic Research, Inc.
    11. Michael D. Bordo & John Landon-Lane, 2010. "The Lessons from the Banking Panics in the United States in the 1930s for the Financial Crisis of 2007-2008," NBER Working Papers 16365, National Bureau of Economic Research, Inc.
    12. David Laidler, 2013. "Reassessing the Thesis of the Monetary History," University of Western Ontario, Economic Policy Research Institute Working Papers 20135, University of Western Ontario, Economic Policy Research Institute.
    13. Otto Eckstein & Allen Sinai, 1986. "The Mechanisms of the Business Cycle in the Postwar Era," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages 39-122, National Bureau of Economic Research, Inc.
    14. Christina D. Romer & David H. Romer, 2013. "The Missing Transmission Mechanism in the Monetary Explanation of the Great Depression," American Economic Review, American Economic Association, vol. 103(3), pages 66-72, May.
    15. Christopher J. Erceg & Michael D. Bordo & Charles L. Evans, 2000. "Money, Sticky Wages, and the Great Depression," American Economic Review, American Economic Association, vol. 90(5), pages 1447-1463, December.
    16. George S. Tavlas, 2011. "Two Who Called the Great Depression: An Initial Formulation of the Monetary‐Origins View," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(2‐3), pages 565-574, March.
    17. Fratianni, Michele & Giri, Federico, 2017. "The tale of two great crises," Journal of Economic Dynamics and Control, Elsevier, vol. 81(C), pages 5-31.
    18. Michael D. Bordo & Hugh Rockoff, 2013. "Not Just the Great Contraction: Friedman and Schwartz's A Monetary History of the United States 1867 to 1960," American Economic Review, American Economic Association, vol. 103(3), pages 61-65, May.
    19. Charles Calomiris, 2009. "Banking Crises and the Rules of the Game," NBER Working Papers 15403, National Bureau of Economic Research, Inc.
    20. Gabriel P. Mathy, 2020. "How much did uncertainty shocks matter in the Great Depression?," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 14(2), pages 283-323, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ehsrev:v:75:y:2022:i:2:p:297-335. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/ehsukea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.