ABSTRACT
As the Great Depression of the 1930s was undoubtedly the greatest challenge to the liberal-capitalistic system, it appears to be worthwhile to compare the diagnoses and therapies coming forward from Vienna and Chicago. This chapter speculates about the relevance of the economists' policy advice for actual policy making. Compared to the fate of the Austrian School, that of Chicago was just the opposite: thanks to Milton Friedman's agitating power it survived in the minds of economists not only as a distinct school, but as a triumphant one. The chapter looks at how Austrian and Chicago economists reacted to crucial questions arising from the experience of the Great Depression, namely the perception of deflationary policy, the evaluation of pump priming, the role of wage cuts, and the long-term norm of monetary policy. It inquires into the policy options that are feasible in a state of deep depression, such as that of the US economy in mid-1932.
