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Essays on the Great Depression
From the Nobel Prize–winning economist and former chair of the U.S. Federal Reserve, a landmark book that provides vital lessons for understanding financial crises and their sometimes-catastrophic economic effects
As chair of the U.S. Federal Reserve during the Global Financial Crisis, Ben Bernanke helped avert a greater financial disaster than the Great Depression. And he did so by drawing directly on what he had learned from years of studying the causes of the economic catastrophe of the 1930s―work for which he was later awarded the Nobel Prize. This influential work is collected in Essays on the Great Depression , an immensely influential account of the origins of the Depression and the economic lessons it teaches.
As chair of the U.S. Federal Reserve during the Global Financial Crisis, Ben Bernanke helped avert a greater financial disaster than the Great Depression. And he did so by drawing directly on what he had learned from years of studying the causes of the economic catastrophe of the 1930s―work for which he was later awarded the Nobel Prize. This influential work is collected in Essays on the Great Depression , an immensely influential account of the origins of the Depression and the economic lessons it teaches.
320 pages, Hardcover
First published January 1, 2000
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652 people want to read
About the author
Ben S. Bernanke
114 books201 followersBen S. Bernanke served as chairman of the Federal Reserve from 2006 to 2014. He was named Time magazine’s Person of the Year in 2009 and was a professor of economics at Princeton University prior to his career in public service.
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Displaying 1 - 13 of 13 reviews
June 13, 2020
The Great Depression is a fascinating event, which – because of its impact on nearly all countries of the world – proves to be very informative about economy.
In this volume, Ben S. Bernanke extensively discusses both the Depression itself and the effects of monetary policies and exchange rate systems in general.
The book comprises nine essays on the macroeconomics of the Great Depression. Bernanke provides an effective introduction and overview. Because the Depression was characterized by sharp declines in both output and prices, the first essay discusses that the declines in aggregate demands were the main factor in the onset of the pivotal event.
In his work, the author raises two main questions: First, what caused the worldwide “aggregate demand puzzle”? Second, why did the Depression last so long?
Bernanke provides detailed answers in the following chapters, presenting evidence that the main factor depressing aggregate demand was a worldwide contraction in money supplies.
However, he also pays attention to non monetary factors, such as banking panic and business failures in clogging up normal flows of credit.
Essays from 5 to 9 deal with issues of aggregate supply in the Depression, with emphasis on the functioning of labor markets.
Very informative, detailed, and well-written.
In this volume, Ben S. Bernanke extensively discusses both the Depression itself and the effects of monetary policies and exchange rate systems in general.
The book comprises nine essays on the macroeconomics of the Great Depression. Bernanke provides an effective introduction and overview. Because the Depression was characterized by sharp declines in both output and prices, the first essay discusses that the declines in aggregate demands were the main factor in the onset of the pivotal event.
In his work, the author raises two main questions: First, what caused the worldwide “aggregate demand puzzle”? Second, why did the Depression last so long?
Bernanke provides detailed answers in the following chapters, presenting evidence that the main factor depressing aggregate demand was a worldwide contraction in money supplies.
However, he also pays attention to non monetary factors, such as banking panic and business failures in clogging up normal flows of credit.
Essays from 5 to 9 deal with issues of aggregate supply in the Depression, with emphasis on the functioning of labor markets.
Very informative, detailed, and well-written.
June 22, 2025
I found Essays on the Great Depression absolutely fascinating. Bernanke’s deep dive into one of the most critical periods in economic history is packed with sharp empirical analysis, and while some of the technical stuff stretched me a bit, it was well worth the effort. He doesn’t just describe what happened during the Great Depression – he dissects the causes and consequences using serious data and economic modelling, and I loved how he brought a modern lens to questions economists have wrestled with for decades. It’s a powerful reminder of why central banks matter and how economic thinking evolves. One of the better economics reads I’ve picked up in a while.
April 6, 2025
I bought this years ago due to a list of great book on finance. It's not, unless you want 9 academic papers in one place to see how he did statistical regressions. But I would go to academic journals if I wanted that.
He essentially goes through a few theories on what created the Great Depression, then explains the statistics, correlations, data sets used, etc to prove, disprove, or inconclusively prove. I used to do some of this math 20 years ago, but I'm not interested in recreating his calculations so I just started scanning sections of it to get to the conclusions. Which are...
The gold standard was a major contribution due to lack of monetary flexibility and transmission effects. Countries that abandoned it earlier could print currency and inflate their way out.
Chapter 3
Deflation is supply of money decreasing causing nominal prices to go down, causing real (vs nominal) wages to go up. Depression is output/productivity going down.
He goes through deflation affecting debt, hurting borrowers ability to repay, and then lenders ability to use deflated collateral for balance sheet assets affect the money multiplier. So liquidity drops, bank runs (panics), etc go into a cycle. Bank panics cause deflation cause depression, possibly due to global contagion if not significantly at a national level.
Output growth was affected by export growth (but he only shows correlations, doesn't mention tariffs), panics, discount rates.
So this chapter helps to explain his actions at the Fed during 2008-10.. He tried to avoid a depression at all costs.
Chapter 4 gets into deflation causes. The math says before 1930 it was due to Federal Reserve (USA and others) policies like gold inflow sterilization causing M1 contraction. There's also wrong distribution of gold among nations, either due to sterilization but also poorly chosen gold exchange rates that didn't correct. After 1930, bank panics killed the money multiplier and continued deflation. In both cases, it was low money M1 stocks. Hitler left the agreements hindering Germany in 1933 and reflated M1. USA sterilized gold inflows in '28-'30, effectively tightening monetary policy.
Chapter 5-
This is just frequency domain (Fourier) and time domain analysis of the labor force (employment-# workers, weekly hours, real wages-nominal hr wage/cpi, product wages-nominal hr wage/wholesale prices, real weekly earnings).
But interesting, new to me is SRIRL, short-run increasing returns to labor, which means that instead of diminishing returns of labor to productivity, it is procyclical. Could be due to labor hoarding during downturns. Hours lead output, employment lags. After WW2 throttling labor changed from shorter work weeks to layoffs. Wages (real or product) not too related. In a later chapter he'll talk about stickiness of nominal wages.
Ch 6
This chapter is more about a model he developed, most discussions on the model instead of what policy worked.
He goes deeper into employment (#workers), number of hours worked per week, and earnings (pay per week or hour) vs productivity. Unskilled vs skilled. The utility of leisure time vs pay. Earnings vs hours - graph doesn't intercept the origin because you need to pay a lot for the first hour if worker is not moonlighting, then grows exponentially because marginal hours vs rest mean more and more to the worker). On the demand side, depressed product demand and earnings were addressed by both layoffs and work sharing (shorter weeks). I guess this is a new model (for supply vs demand for labor) because the traditional model which looked at wages and not total utility (combo of earnings and hours).
Because I'm not an economist, it's not that interesting because it's common sense, but reminds me of Kahnneman finding similar problems with eco theories. The standard model assumes labor supply to vary continuously with parametric wage, but in real life a worker needs to decide between discrete offerings of work.
But Fig 2 is cool. Because average wage is more than the marginal, workers would work more hours for an additional average wage but the marginal wage offered is less.
Likewise, cutting hours per week results in higher average wage, which sounds good for labor unless supplemental income is not available resulting in subsistence.
Mentions union effects (strikes), federally employed emergency workers, New Deal, Wagner act. Unionization has a strong impact in the model. NRA codes and government work programs did not, but p232 says NRA increased employment, reduced hours. Unionization kept labor supply below competitive levels p240.
Chapter 7
Lessons from the USA Great Depression for Europe now (1980's, 90's) - high unemployment.
His view is that the New Deal created the conditions for a self correcting recovery than being the source of the recovery.
Roosevelt believed in reflation. But there was both high unemployment and inflation.
Productivity went up because employers were forced to treat workers better (unions, wages) with New Deal.
But unemployment is not related to inflation directly, but reflation helps by stopping deflation expectations.
No conclusion on what Europe should do.
Chapter 8
Talks about cause of SRIRL. Technology shock doesn't support the data. True increasing returns is possible. Labor hoarding is likely.
Again mentioned p267 causes of the Great Depression (gold standard mismanagement, letting banks fail, falling money supply, procyclical fiscal policy). To me, he means fiscal tightening when economy went down.
Chapter 9
Wage stickiness.
In my words... yes, nominal wages are sticky, and you can compensate by inflation/money supply to deflate real wages.
High unemployment does not mean lower wages. p298
Strong inverse relationship between output and real wages during depression. And gold standard.
This paragraph is good p276 -
Brief synopsis of gold standard theory.. contractionary monetary policy in the late 1920s to slow USA stocks, mild deflation snowballed, currency crisis 1931, scramble for gold, surplus countries sterilized the inflows, sub foreign reserves w gold, commercial bank runs. Gold backed money, reduced money supplies, falling prices/output/employment. WW1 reparations, debts stifled cooperation. Countries start leaving gold standard unilaterally.
Overall, book is more about his models.
He mentioned tariffs, WW1 and New Deal as exogenous influences, but no conclusions. Comments are based on gold standard, bank runs, money supply.
He essentially goes through a few theories on what created the Great Depression, then explains the statistics, correlations, data sets used, etc to prove, disprove, or inconclusively prove. I used to do some of this math 20 years ago, but I'm not interested in recreating his calculations so I just started scanning sections of it to get to the conclusions. Which are...
The gold standard was a major contribution due to lack of monetary flexibility and transmission effects. Countries that abandoned it earlier could print currency and inflate their way out.
Chapter 3
Deflation is supply of money decreasing causing nominal prices to go down, causing real (vs nominal) wages to go up. Depression is output/productivity going down.
He goes through deflation affecting debt, hurting borrowers ability to repay, and then lenders ability to use deflated collateral for balance sheet assets affect the money multiplier. So liquidity drops, bank runs (panics), etc go into a cycle. Bank panics cause deflation cause depression, possibly due to global contagion if not significantly at a national level.
Output growth was affected by export growth (but he only shows correlations, doesn't mention tariffs), panics, discount rates.
So this chapter helps to explain his actions at the Fed during 2008-10.. He tried to avoid a depression at all costs.
Chapter 4 gets into deflation causes. The math says before 1930 it was due to Federal Reserve (USA and others) policies like gold inflow sterilization causing M1 contraction. There's also wrong distribution of gold among nations, either due to sterilization but also poorly chosen gold exchange rates that didn't correct. After 1930, bank panics killed the money multiplier and continued deflation. In both cases, it was low money M1 stocks. Hitler left the agreements hindering Germany in 1933 and reflated M1. USA sterilized gold inflows in '28-'30, effectively tightening monetary policy.
Chapter 5-
This is just frequency domain (Fourier) and time domain analysis of the labor force (employment-# workers, weekly hours, real wages-nominal hr wage/cpi, product wages-nominal hr wage/wholesale prices, real weekly earnings).
But interesting, new to me is SRIRL, short-run increasing returns to labor, which means that instead of diminishing returns of labor to productivity, it is procyclical. Could be due to labor hoarding during downturns. Hours lead output, employment lags. After WW2 throttling labor changed from shorter work weeks to layoffs. Wages (real or product) not too related. In a later chapter he'll talk about stickiness of nominal wages.
Ch 6
This chapter is more about a model he developed, most discussions on the model instead of what policy worked.
He goes deeper into employment (#workers), number of hours worked per week, and earnings (pay per week or hour) vs productivity. Unskilled vs skilled. The utility of leisure time vs pay. Earnings vs hours - graph doesn't intercept the origin because you need to pay a lot for the first hour if worker is not moonlighting, then grows exponentially because marginal hours vs rest mean more and more to the worker). On the demand side, depressed product demand and earnings were addressed by both layoffs and work sharing (shorter weeks). I guess this is a new model (for supply vs demand for labor) because the traditional model which looked at wages and not total utility (combo of earnings and hours).
Because I'm not an economist, it's not that interesting because it's common sense, but reminds me of Kahnneman finding similar problems with eco theories. The standard model assumes labor supply to vary continuously with parametric wage, but in real life a worker needs to decide between discrete offerings of work.
But Fig 2 is cool. Because average wage is more than the marginal, workers would work more hours for an additional average wage but the marginal wage offered is less.
Likewise, cutting hours per week results in higher average wage, which sounds good for labor unless supplemental income is not available resulting in subsistence.
Mentions union effects (strikes), federally employed emergency workers, New Deal, Wagner act. Unionization has a strong impact in the model. NRA codes and government work programs did not, but p232 says NRA increased employment, reduced hours. Unionization kept labor supply below competitive levels p240.
Chapter 7
Lessons from the USA Great Depression for Europe now (1980's, 90's) - high unemployment.
His view is that the New Deal created the conditions for a self correcting recovery than being the source of the recovery.
Roosevelt believed in reflation. But there was both high unemployment and inflation.
Productivity went up because employers were forced to treat workers better (unions, wages) with New Deal.
But unemployment is not related to inflation directly, but reflation helps by stopping deflation expectations.
No conclusion on what Europe should do.
Chapter 8
Talks about cause of SRIRL. Technology shock doesn't support the data. True increasing returns is possible. Labor hoarding is likely.
Again mentioned p267 causes of the Great Depression (gold standard mismanagement, letting banks fail, falling money supply, procyclical fiscal policy). To me, he means fiscal tightening when economy went down.
Chapter 9
Wage stickiness.
In my words... yes, nominal wages are sticky, and you can compensate by inflation/money supply to deflate real wages.
High unemployment does not mean lower wages. p298
Strong inverse relationship between output and real wages during depression. And gold standard.
This paragraph is good p276 -
Brief synopsis of gold standard theory.. contractionary monetary policy in the late 1920s to slow USA stocks, mild deflation snowballed, currency crisis 1931, scramble for gold, surplus countries sterilized the inflows, sub foreign reserves w gold, commercial bank runs. Gold backed money, reduced money supplies, falling prices/output/employment. WW1 reparations, debts stifled cooperation. Countries start leaving gold standard unilaterally.
Overall, book is more about his models.
He mentioned tariffs, WW1 and New Deal as exogenous influences, but no conclusions. Comments are based on gold standard, bank runs, money supply.
April 27, 2020
Interesting, but somewhat repetitive. I'll admit to glossing over some of the details because I'm not an academic researcher and didn't need that. Overall worth the read though.
December 15, 2013
Good reference. Technical and worth a second read.
February 10, 2024
Fair waning, I’m a bit into histories of the Great Depression. (Much like Ben confesses to in the forward.).
I had very, (very) low expectations for this book. For one thing it’s based on a series of research papers. I generally hate books that are a series of disconnected papers, and that they are research papers only further dimmed my outlook.
Also… the paper has quite a bit of math. (I have a math background but still hopping into a different branch of math is never really feasible unless one is going to dedicate months to the project….). Luckily in this case, most of the math in this case is somewhat tangential to the reports in that it’s primarily statistics and used to provide information on correlation and causality. So at one level, you can just take it at face value.
So if it’s a collection of research papers, has a lot of math which I ignored, why 3 stars. Well in the first 3 or 4 sections there are some very clear simple sections on the Depression’s causes etc…. It also ends up being a nice bibliography for other sources. So 3 stars it is. (You have to be into the Depression and sheer readability might take it down to 1.5…).
(I shop B&N. They’re the little guy and they have bookstores.)
I had very, (very) low expectations for this book. For one thing it’s based on a series of research papers. I generally hate books that are a series of disconnected papers, and that they are research papers only further dimmed my outlook.
Also… the paper has quite a bit of math. (I have a math background but still hopping into a different branch of math is never really feasible unless one is going to dedicate months to the project….). Luckily in this case, most of the math in this case is somewhat tangential to the reports in that it’s primarily statistics and used to provide information on correlation and causality. So at one level, you can just take it at face value.
So if it’s a collection of research papers, has a lot of math which I ignored, why 3 stars. Well in the first 3 or 4 sections there are some very clear simple sections on the Depression’s causes etc…. It also ends up being a nice bibliography for other sources. So 3 stars it is. (You have to be into the Depression and sheer readability might take it down to 1.5…).
(I shop B&N. They’re the little guy and they have bookstores.)
September 8, 2021
First, a little warning for potential readers: this is not a book. Not in the literal sense. It is a collection of specialised macro-economics research papers. So a little technical and wouldn’t be suitable for casual readers, i would imagine.
Found the first part repetitive and rather boring. Wasn’t impressed at all. Playing around with the time-series all over the shop to basically keep repeating the same message: Gold is bad, gold is bad, gold is bad.. here, have some of my green papers instead.. shocking coming from a Central Banker 😋
I found the second part much more interesting. The thoughts and ideas thrown around re the concepts of labour and employment dynamics, productivity and hours worked.. was more interesting.
Remains a very respectable author, economist, academic and indeed a respected central banker during his tenure at the Feds. No doubt.
Found the first part repetitive and rather boring. Wasn’t impressed at all. Playing around with the time-series all over the shop to basically keep repeating the same message: Gold is bad, gold is bad, gold is bad.. here, have some of my green papers instead.. shocking coming from a Central Banker 😋
I found the second part much more interesting. The thoughts and ideas thrown around re the concepts of labour and employment dynamics, productivity and hours worked.. was more interesting.
Remains a very respectable author, economist, academic and indeed a respected central banker during his tenure at the Feds. No doubt.
October 6, 2020
I don’t doubt that this, very technical, book would be of great value to an economics professional (researcher or administrator), but I’m not sure if it is worth the time for a hobbyist trying to develop a better framework for causes of the great depression... The book could be retitled “Depression era economic modeling and analysis”.
April 9, 2020
A reread as part of the effort (see Peter Temin, in the CEH-US) to frame views of the challenge confronting policy makers in the current economic context, as we battle COVID-19.
A generally, non-technical treatment of the GD, with an clear critique of policy during the period.
A generally, non-technical treatment of the GD, with an clear critique of policy during the period.
December 29, 2022
Likely I under rated the book. It has quite a lot of econometrics and economic topics in depth outside my interest AND understanding of the material.
August 15, 2024
Interesting, but did no finish
Last chapters of the book got toooo technical for me
Last chapters of the book got toooo technical for me
Want to read
November 13, 2008Looking to read this over Christmas break. Does anyone have access to the University of Utah library? (Or another library that has a copy. There seem to be slim pickings right now. I wonder why...)
May 20, 2012
I only read the sections on monetary policy, not the essays on labor and business cycles. His ideas about the depression are pretty much in line with what he seems to be doing at the Fed.
UPDATE: This alignment has turned out not to be so true...
UPDATE: This alignment has turned out not to be so true...
Displaying 1 - 13 of 13 reviews