Joseph Salerno reviews James Grant’s new book The Forgotten Depression — 1921: The Crash That Cured Itself in the spring 2016 issue of The Independent Review. Salerno points out how, at the time, there was widespread support among economists and politicians for curing the depression by laissez-faire “liquidationist” policy.
The Forgotten Depression is a narrative history of the depression of 1920–21. Although it is informed by a very definite theory — the Austrian business cycle theory — it is not a standard work in applied economics. It does not first present the theory in a rigorous formulation and then move on to apply the theory by adducing pertinent qualitative facts and statistical data to explain a complex historical event such as a depression. It instead proceeds by way of anecdotes and contemporary media accounts, liberally seasoned with telling quotations from politicians, policy makers, economists, business leaders, and other contemporary observers of the unfolding depression. Data on money, prices, and production are inserted at crucial points to keep the reader abreast of the economy’s precipitous decline, but they do not dominate and weigh down the story. James Grant, a masterful stylist, effectively weaves these disparate elements into a seamless and compelling narrative that never flags in pace or wanders off track. The book should appeal to a wide variety of readers, from college students and business professionals to academic economists and policy makers.
