At the Pittsburgh Tribune-Review, George Mason University economist Donald Boudreaux argues that the "regime uncertainty" theory developed by libertarian economist Robert Higgs presents "one of the most powerful challenges to any Keynesian diagnosis of economic ailments." As Boudreaux explains:
Higgs' careful look at the data on the Great Depression and World War II convinced him that (1) a U.S. economy producing genuine prosperity wasn't restored until 1946, and (2) investors hunkered down, especially from 1935-40, because New Deal regulations—along with President Franklin Roosevelt's increasingly vocal hostility to enterprise and successful risk-takers—created too much uncertainty about how government would treat profits and wealth accumulation.
The "regime uncertainty"—described by Higgs as "a pervasive uncertainty among investors about the security of their property rights in their capital and its prospective returns"—unleashed by actual and threatened New Deal interventions made private innovation and entrepreneurial effort simply too unattractive. So private investment spending largely ground to a halt during FDR's reign.
The "Great" was thus put into the Great Depression.
Read the full story here. Watch Higgs discuss Arthur Ekirch's classic history The Decline of American Liberalism with Reason.tv's Nick Gillespie below.