Barkley, please correct me if I have taken the comment below out of context. To me, it seems to show exactly what is wrong with using the AS-AD framework to help describe the great depression. If one begins with the financial collapse instead of with the deficiency of AD, one is not led to raises the question of what the government can do to raise AD. One is led to a more detailed analysis of what causes financial collapses. This, it seems to me, is exactly where one who aims to comprehend the cause of the great depression ought to be led. (I would refer you again to the Mundell address.) Unfortunately, for teachers of economics principles who use the typical textbook, to follow this route is unrewarding. A large part of the reason for this is another myth. It is that an astute legislature, informed by knowledgeable economists, created the central bank in order to avoid financial collapses. As I see it, the textbooks have perpetuated both of these myths. In doing so, their writers have made a good living and unimaginative teachers and their students have had an easier life. At the same time, students were enticed to develop a predisposition to think that economists have been helpful in producing an enlightened macroeconomic policy and that democratic governments have, more often than not, followed the economists' advice. To claim that economics can explain the great depression is an excellent way to stimulate student interest. But do you think that support this claim with myths is a worthwhile long run goal? Barkley Rosser wrote: > Now, I have discussed above how financial collapses can easily be > analyzed as a source of collapsing aggregate demand as businesses fail > to carry out real capital investments, which then, well, I shall not > repeat what I said above. Pat Gunning