Keynes and Friedman on Expectations Mismatches During the Great Depression

Sylvie Rivot ()
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Sylvie Rivot: BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: This chapter uses the Great Depression as a case study to investigate Keynes' and Friedman's respective appraisals of this severe episode. We analyse first Friedman's explanation of the Great Depression as phenomenon driven by monetary mismatches. We show that the late Friedman eventually put at the core of his explanations for macroeconomic disequilibria the issue of mismatches in short-term nominal expectations. Next, we turn to Keynes. We show how in the very early 30s Keynes shifted his concern from short-term disturbances to dysfunctionings in long-run expectations. Keynes' appraisal of the Great Depression in terms of coordination failures regarding the intertemporal plans is an alternative to Friedman, an alternative that puts the stress on the indeterminacy of the structure of the economy in the remote future.

Date: 2020-03-21
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Published in Arie Arnon; Warren Young; Karine van der Beek. Expectations Theory and Applications from Historical Perspectives, Springer Cham, pp.87-108, 2020, 978-3-030-41357-6. ⟨10.1007/978-3-030-41357-6_5⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03993514

DOI: 10.1007/978-3-030-41357-6_5

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