INTELLECTUAL SETTING IN THE 1920s

Macroeconomic thought in the 1920s and 1930s produced various strands of economic analysis originating from European and American economists, though the appellation macroeconomics was not used at the time. The conventional wisdom was that economists could analyze chains of causation between major economic aggregates; fluctuations in these aggregates were used as representations of crises and business cycles. Economic policy responses drawn from economic analysis would turn on the means of stabilizing economies to prevent or at least mitigate what were then variously understood as crises, business fluctuations, or trade cycles. In this chapter, we review developments in theoretical work and associated applications on the subject completed in international organizations. The following two chapters will survey recommendations offered on macroeconomic stabilization policy by the ILO and LON designed to deal with crises and cycles.

Recent research on the development of macroeconomic ideas in the 1920s up to the mid-1930s has been less concerned with the pervasive influence of J.M. Keynes – who was doubtless, as we shall see, active in the debates on crises and cycles prior to the appearance of his General Theory of Employment Interest and Money in 1936 – and more so with other macroeconomic perspectives which emerged and evolved contemporaneously with Keynes's ideas (Dimand 1993, 1995; Jonung 1979; Laidler 1991, 1999). There were also other sources of research on business cycles in particular.