Abstract
What were the underlying causes of the Great Depression of the nineteen thirties? Why did the downturn in 1929 become so severe, why was the depression so prolonged, where did it originate and why did it spread throughout the whole world? There is still no general agreement among economists as to the answers to these questions. In this paper I propose first to survey briefly a number of the views that have been expressed as to the causes of the Great Depression. I shall then outline a theoretical framework for examining these views. After this I propose a hypothesis of my own which meets the requirements of this framework, yet has only recently received serious attention. In conclusion, I evaluate the various competing views in the light of the theoretical framework proposed and in terms of my own hypothesis. A number of economists have advanced an explanation of the 1929 decline which emphasizes the creation of excess capacity in the United States economy. Thus Arthur Smithies writes:
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