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Causes Of The Great Depression Essay

1355 Words6 Pages

Scientific research methods in Economics

Xuan Chinh Mai

Matriculation number: 3089076

Bremen - 3rd December, 2016

From the Great Depression to the Great Debate: How the science of economics changed.
The Great Depression of the 1930s was a severe international economic event that had disastrous effects on the life of people in many countries. Its causes have been extensively discussed by many economists, but still remain an actively controversial topic. This context sharpened the conflict of many schools of economic thought because of their different perspectives and explanations. In this situation raised the famous clash between the Austrian economic view whose representatives were Ludwig von Mises and Friedrich von Hayek and the …show more content…

The crisis had its root from the previous decade and started by the devastating crash of the Stock market in October 1929 in the US. It was continued by a chain of events. From 1929 to 1932, the unemployment rates increased by 607%, 129%, 214% and 232% respectively in the United States, Great Britain, France, and Germany . These catastrophic events went on and pulled the whole US economy to its bottom. By the year 1933, there were more than 13 million unemployed workers and nearly half of the US banks had closed down . Despite many policies of the US government, the economy still would not recover until before the World War …show more content…

Hayek argued that the cause of this depression was from the easy credit policies of the US government in the previous decade, which made the economy become more sensitive to the economic fluctuation. He also criticized the government’s interference following the big crash as it slowed down the recovery of the market . In his book The Road to Serfdom (1944), the Austrian economist then developed his arguments about the role of the state further. He argued that the increase of government intervention is the beginning of the rise in the restriction of individual freedom, which will unavoidably result in the emergence of dictatorial systems. The winning of Hayek’s ideas over Keynes’s could be observed since the eightieth when many changes adapting the liberal market ideas happened . Sequentially, the last several decades witnessed the dominance of the neoliberalism in the economic policy and the public’s attention

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