Keynes and Friedman on Expectations Mismatches During the Great Depression

Sylvie Rivot ()
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Sylvie Rivot: BETA

A chapter in Expectations, 2020, pp 87-108 from Springer

Abstract: 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
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Persistent link: https://EconPapers.repec.org/RePEc:spr:spshcp:978-3-030-41357-6_5

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

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