In 1934, when Lionel Robbins wrote The Great Depression, he was a committed advocate of the Austrian School of economics. This would later change, but in this book he brilliantly applies the Austrian theory of the business cycle to explain the depression — which, he notes, was of unprecedented severity.
An expansion of bank credit creates a boom that cannot be sustained, and the inevitable collapse of the boom is the depression. Robbins traces this boom/bust cycle, detailing the central bank policies of the 1920s to provide the Austrian explanation for the resulting depression.
Robbins argues forcefully that the way to end economic depressions does not lie in restrictionist measures and central planning. Instead, the free market needs to be restored and international trade encouraged. Central planning, far from helping to restore prosperity, increases economic nationalism and restricts economic growth.
If the policy gurus at the Fed had read and understood this book, they could have spared us the economic havoc of recent years. Unleash markets and stand aside.