Anthony Patrick O'Brien

A Behavioral Explanation for Nominal Wage Rigidity During the Great Depression

Nominal wages in manufacturing were left unchanged by the large decline in nominal demand that marked the first two years of the Great Depression. This rigidity in nominal wages is explained using the tools of the behavioral theory of the firm. The emphasis is on the reasons firms changed their decision rules linking fluctuations in final sales to changes in nominal wages.

Factory Size, Economies of Scale, and the Great Merger Wave of 1898-1902

Analysis of census data reveals that the size of the average factory in the United States grew more rapidly during the 1870s and 1880s than during any subsequent decade through the 1920s. While the average factory doubled in size between 1869 and 1889, it increased by only about a quarter between 1899 and 1929. These results support the view that the reaping of economies of scale was not an important motive for the great merger wave.

Trade Wars: Canada 's Reaction to the Smoot-Hawley Tariff

Strange as it seems, the infamous Smoot-Hawley Tariff might have had an expansionary effect on the U.S. economy. Basic macroeconomic principles indicate that the direct effect of a tariff increase is expansionary. This expansionary effect might be offset by retaliatory increases in foreign tariffs. Barry Eichengreen has recently questioned whether significant retaliation to Smoot-Hawley occurred. This article demonstrates that the tariff increases enacted during 1930 in Canada—the largest trading partner of the United States—were in direct response to Smoot-Hawley. The conventional wisdom that Smoot-Hawley hurt the U.S. economy may be right after all.

The ICC, freight rates, and the Great Depression

Abstract When the Interstate Commerce Commission first gained substantial control over railroad freight charges in the early years of the 20th century, it used its power to ensure adherence to published tariffs and, hence, to reduce the volatility of freight charges. Following the passage of the Transportation Act of 1920, the Commissions dominant regulatory objective changed to one of providing railways with an adequate return on their invested capital. The Commissions attempts to attain this new objective resulted in substantial increases in real freight charges during economic contractions. The increase in real freight charges at the beginning of the Great Depression almost certainly increased its severity.

Were Money Wages Always Rigid? A Look at the Reliability of Survey Evidence on Changes in Wage Rates

In recent years, the once conventional view that nominal wage rates were much more flexible before the Great Depression than after has been challenged. This challenge has been reinforced by several recent studies that are based on monthly wage data gathered by state labor bureaus. The surveys used by the state labor bureaus in gathering the data appear to have been biased toward the finding that wages have not changed. Hence inferences drawn from the data collected in these surveys are not reliable.

Retreat from Protectionism: R. B. Bennett and the Movement to Freer Trade in Canada, 1930–1935

Both the United States and Canada enacted sharp increases in tariff s in 1930 as the Great Depression was beginning. Th e failure of high tariff s to lead to economic recovery in the following years helped to undermine political support for protectionism. Although the conversion to free trade in the United States during the 1930s has been studied, the similar movement in Canada has been relatively neglected. 1 McDonald et al. fi nd that R. B. Bennett’s surprising victory in 1930 was due to Canadian voters’ resentment over the Smoot-Hawley Tariff . 2 As promised during his campaign, Bennett quickly enacted tariff increases on U.S. goods and took steps to make Canada independent of the United States and to strengthen its ties to the United Kingdom. Beginning with Bennett’s election, we chronicle his deliberations during the period 1930–35 as he reformulated his views about the appropriate role of the tariff as a policy tool. We fi nd that Bennett’s dramatic about-face on trade policy was largely driven by forces beyond his control: the establishment of a “new order,” brought about by changes in the trade policies of Canada’s two major trading partners, the United States and Britain, very much restricted Bennett’s policy choices.

A Ghost's Memoir: The Making of Alfred P. Sloan's My Years with General Motors. By John McDonald. Cambridge, MA: The MIT Press. Pp. xvii, 202.

Who wrote Alfred Sloans My Years with General Motors?a. Alfred Sloanb. John McDonaldc. Alfred Chandlerd. A group of more than 20 persons, known and unknownFans of the old Groucho Marx quiz show might be tempted to choose answer a. John McDonald, in his posthumous memoir being reviewed here, argues for b. But I am inclined to think the best answer is d.