The Great Depression Analysis

WHAT ECONOMISTS DO

Economists have an image of practicality and worldliness not shared by physicists and poets.

Some economists have earned this image.

myself and many of my colleagues here at Chicago--have not.

Others--

I'm not sure

whether you will take this as a confession or a boast, but we are basically story-tellers, creators of make-believe economic systems.

Rather than try

to explain what this story-telling activity is about and why I think it is a useful--even an essential--activity, I thought I would just tell you a story and let you make of it what you like.
My story has a point: I want to understand the connection between changes in the money supply and economic depressions.

One way to

demonstrate that I understand this
money supply.

I think I know how to do

this, though I'm not absolutely sure, but a real virtue of the democratic system is that we do not look kindly on people who want to use our lives as a laboratory. So

I will try to make my depression somewhere else.

The location I have in mind is an old-fashioned amusement park--roller coasters, fun house, hot dogs, the works.

I am thinking of Kennywood Park

in Pittsburgh, where I lived when my children were at the optimal age as amusement park companions - a beautiful, turn-of-the-century place on a bluff overlooking the Monongahela River.

If you have not seen this

particular park, substitute one with which you are familiar, as I want you to try to visualize how the experiment I am going to describe would actually work in practice.

2
Kennywood Park is a useful location for my purposes because it is an entirely independent monetary system. the park.

One cannot spend U.S. dollars inside

At the gate, visitors use U.S. dollars to purchase tickets and

then enter the park and spend the tickets. many tickets per ride.

Rides inside are priced at so

Ride operators collect these tickets, and at the end

of each day they are cashed in for dollars, like chips in a
Now how does all of this look from the point of view of

the operator of

a ride or the guy selling hot dogs? Again, there will be a variety of reactions. In general, most operators will notice that the park seems kind

of empty, for a Sunday, and that customers don't seem to be spending like they usually do.

More time is being spent on 'freebies', the river view or

a walk through the gardens.

Many operators take this personally. Those who

were worried that their ride was becoming passe' get additional confirmation. Those who thought they were just starting to become popular,

and had had thoughts of adding some capacity, begin to wonder if they