Center for International and Development Economics Research

Eichengreen argues that recent developments in financial theory provide rigorous microeconomic foundations for the fragile, volatile and crisis-prone forms of market behavior identified in Charles Kindleberger’s Manias, Panics and Crashes and invoked in The World in Depression as an explanation for interwar events. It is incorrect to assert, as is often done, that economic theory in the form of the efficient-markets hypothesis provides no basis for such concerns.