The economies of the world have gone through many cycles of prosperity and recession.
Even the United States, which has had a steady increase of prosperity over two centuries,
has had deep depressions between times of economic growth. A good treatment of this
subject will try to explain why we have these ups and downs.
Here, some history is needed. The Great Depression and the events preceding it should
be discussed, but a longer view is best, looking for common threads in earlier recessions
and depressions. Economic phenomena dont "just happen" and a good text
will explore the work of experts to find plausible explanations. The views of the
Keynesians, the Monetarists, and the Austrians should be presented and explained in some
Many texts have something to say about the Great Depression. Several uncritically
repeat the myths that President Hoover was a laissez faire president, that the
depression was caused by free markets, and that President Franklin Roosevelts
interventionist policies produced prosperity. These assertions have been revealed by
subsequent scholarship to be little more than propaganda.
The truth is that government intervention may have caused the Depression, and almost
certainly prolonged it. The 1920s and 1930s saw huge fluctuations in the nations
money supply, fostered by Federal Reserve policy. There was a huge hike in tariffs in 1930
and a doubling of income-tax rates in 1932. Massive government intervention in the economy
throughout the New Deal period failed to revive the economy. Running for president in
1932, the Democratic ticket of Roosevelt/Garner assailed the Hoover administration for
"leading the country down the path to socialism" and promised a 25 percent
reduction in federal spending, which it never subsequently delivered. All of these factors
are believed to have contributed to the disaster, and should be presented to students and
contrasted with the prevailing myth. (See Great Myths of the Great Depression.)
Economics texts should never present only Keynesian economic theories regarding the
business cycle. Neither should they uncritically accept Keynes idea that spending
determines national income.
Increasingly, it is apparent that the business cycle is not a mysterious phenomenon
that befalls a hapless free economy, but is instead the direct consequence of unwise and
often politicized manipulations of money and credit by monetary authorities. Students
should be exposed to the emerging evidence supporting this theory.