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In this rejoinder, I address five issues raised by Eggertsson’s reply to my commentary. First, I argue that the pre-Depression gold standard, though not ideal, was not a barrier to a desirable reflation. I then offer an account of the 1937-38 recession that views it as a continuation of the Roosevelt regime in a way that contradicts Eggertsson’s attempt to cleave it from the expectations-enhancing regime change he focused on. I also respond to his invoking the “conventional wisdom” regarding Hoover and Roosevelt by offering additional evidence that said wisdom is faulty. Fourth, I respond to his admission of ignorance of Robert Higgs’s work by recapping and adding to the evidence for regime uncertainty’s role in extending the Great Depression (evidence notably about private investment and about private-sector hours worked). I critically assess the role investment played in Eggertsson’s original AER article by noting his failure to distinguish government and private investment, as it was the latter that Higgs demonstrates was affected by regime uncertainty and whose weakness constituted the failed recovery. Finally, I note that if narrow methodological strictures blind us to the evidence provided by narrative history, we will fail to understand that history at our own peril, as the growing parallels between the Great Recession and the Great Depression demonstrate.
This article is a response to A Reply to Steven Horwitz’s Commentary on “Great Expectations and the End of the Depression” by Gauti B. Eggertsson (EJW, September 2010).