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Posted November 3, 2001
Shifts in American Psychology during 1918-30
Shifts in American Psychology during 1918-30 As someone who is interested in economics, financial markets, and business, the stock market crash of 1929-1932 has always grabbed my attention in those terms. As a result, my favorite book on the events leading up to the stock market melt down is John Kenneth Galbraith¿s famous book, The Great Crash 1929. Having recently reread that book to contemplate the stock market melt down of 1999-?, I was interested to see what lessons could be drawn from that experience to this one from reading this book. As a work of psychological history, Professor Klein was hampered by the lack of survey and sentiment indices. As a result, he relies a great deal on what prominent people had to say and what they did. As a result, the bulk of the material repeats what Galbraith covered. To this material are added thoughtful observations about trends in popular expenditures for automobiles, interest in sports (especially baseball), fads (such as flag-pole sitting), modern marketing (including advertising through movies and radio), and the acceptance of installment purchasing. He picks up a number of individuals who represent different ¿types¿ who experienced the stock market crash, to help us see how the effects varied from person to person. Groucho Marx saw himself lose money he could regain through future earnings, while others saw themselves wiped out for all time. Both Charley Mitchell (no relation) of National City Bank and Jesse Livermore provide cautionary tales. I was fascinated by Professor Klein¿s thoughts about how Herbert Hoover was caught in a dilemma between his desire to help and his strong feeling that government should be kept small. This notion of focusing on the psychological change though would apply much better to the Great Depression itself than to the stock market crash. Since I was a child, many people have told me about how the Depression changed their outlook on life. Whenever I asked them about the stock market crash as a cause of a changed perspective, they said it had no impact. As Professor Galbraith points out, the number of stock investors was less than 2 million in those days. The stock market crash was a background event for most people, albeit an important one since a very high percentage of consumer spending was done by the wealthiest people, as Professor Galbraith points out. Ultimately, this history has too little economic, financial, and business perspective to fully capture what this event means. I suspect that it will not be widely read, even though the information and the analysis are perfectly fine as far as they go. How can we modulate the swings in investment emotion that cause markets to rise too high . . . and fall too low? What will we lose if we do? Donald Mitchell, co-author of The 2,000 Percent Solution and The Irresistible Growth Enterprise
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