My father passed his centennial birthday on October 15, 2008. Within two weeks of that milestone, one of his books, The Great Crash, 1929, was back on the best-seller lists. That is no doubt mainly because the book is famous as a master narrative, combined with the eerie similarities between the years of Our Lord 1929 and 2008.
But why do the similarities seem so great? One reason, perhaps, is that we understand the events of October 1929 in the first place through a theoretical framework created by The Great Crash, 1929. It is a framework that emphasizes the role of speculative euphoria as a catalyst for imaginative fraud, theft, and abuse, and that illuminates the incentives for, and consequences of, complaisance by public authority. But above all, it places the financial sector in context, recognizing, and illustrating its role as a catalyst for prosperity and disaster in the larger spheres of economic life.
None of this was fully clear to economists before Galbraith; much of it has been highly disputed by many economists since. In Milton Friedman's telling, it was the tight policy of the Federal Reserve that converted slump into depression. In Jude Wanniski's, it was the Smoot-Hawley tariff. If Mr. Kevin Hassett of the American Enterprise Institute is to be believed, it was the cartel-friendly policies of the National Recovery Administration and the union-friendly policies of the Wagner Act.