How an Energy Transition Underlay the Great Depression

Christopher Kennedy

Economics Working Paper Archive from Levy Economics Institute

Abstract: This paper explains the mechanisms by which a major energy transition produced the US Great Depression. Stock market indices show the 1927-29 Wall Street Bubble was led by petroleum-based technologies--especially airplanes and agricultural machinery. The subsequent crash was triggered by oil discovery. Tractors replacing 32 percent of horses over the course of the 1920s led to a 26 percent increase in the net available farmland for domestic consumption. The oversupply of land lowered farm prices, causing deflation. The deflation was non-uniform, with prices of coal, metals, and building materials--essential for capital formation--rising in real terms. Railroads had hegemonic control over transportation and energy supply; their decline, complicated by technological lock-in, undermined the US financial system, contributing to bank failures. Several statistical tests corroborate the energy transition hypothesis.

Keywords: Great Crash; Wall Street Bubble; Deflation; Coal; Petroleum; Tractors; Airplanes; Railroads (search for similar items in EconPapers)
JEL-codes: N1 N5 N7 Q4 (search for similar items in EconPapers)
Date: 2026-07
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.levyinstitute.org/wp-content/uploads/2026/07/wp_1121.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lev:wrkpap:wp_1121

Access Statistics for this paper

More papers in Economics Working Paper Archive from Levy Economics Institute
Bibliographic data for series maintained by Lindsey Carter ().