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A note on America's 1920--21 depression as an argument for austerity

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  • Daniel Kuehn

Abstract

This note argues that recent interest in the 1920--21 depression in the USA as a historical precedent for austerity is inappropriate. Most of the austerity measures preceded the depression, which had already begun receding by the time Warren Harding implemented the relatively modest spending and tax cuts that are cited by modern proponents of austerity. The evidence suggests that the 1920--21 depression was the result of a variety of supply constraints, rather than a deficiency of effective demand, and is therefore a poor test of the efficacy of Keynesian fiscal policy. Copyright The Author 2012. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.

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  • Daniel Kuehn, 2012. "A note on America's 1920--21 depression as an argument for austerity," Cambridge Journal of Economics, Oxford University Press, vol. 36(1), pages 155-160.
  • Handle: RePEc:oup:cambje:v:36:y:2012:i:1:p:155-160
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    File URL: http://hdl.handle.net/10.1093/cje/ber028
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    Cited by:

    1. Patrick Newman, 2016. "The depression of 1920–1921: a credit induced boom and a market based recovery?," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 29(4), pages 387-414, December.
    2. Bruce Carlin & William Mann, 2017. "Finance, farms, and the Fed's early years," NBER Working Papers 23511, National Bureau of Economic Research, Inc.

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