How did a family become rich in the 1920s? To be rich was to have a sufficient investment so as to yield an income capable of supporting a family in its accustomed fashion. How this was to be achieved was a question that vexed many in the age of Gatsby. For many working- and middle-class Americans it must have seemed that everyone but them was getting rich. Some made fortunes in real estate; others in the stock market; others through entrepreneurial start-ups. In a now-(in)famous interview published in the Ladies Home Journal (August 1929), John J. Raskob contended that there were four types of investors: those who put their money in a savings bank and earned a modest interest and never got rich; those who tried to get rich all at once through the promise of “any wildcat security” and typically failed; those impatient and frustrated by the delay in realizing wealth who abandoned saving at all; and those who methodically invested nontrivial fractions of their monthly incomes in shares of highly regarded companies, reinvested the dividends, and waited twenty years. The fourth type was most likely to succeed. Raskob's infamy was more about his timing than his message. The entire modern 401(k) defined-contribution retirement edifice, after all, is based on Raskob's insight.

The 1920s are, in the popular telling, less about Raskob's methodical and patient route to riches than the wildcat investor's madness and folly; the 1930s paid the wages of folly. In Crash! Phillip Payne mostly embraces this narrative. Payne, in fact, begins with a summary of Charles Mackay's Memoirs of Extraordinary Popular Delusions and the Madness of Crowds (1841), which reveals that asset bubbles are nearly as old as asset markets and originate in the delusion that “someone has discovered easy money” (p. 4). Once deluded, inexperienced speculators and traders keep speculating and trading, confident in their belief that prices will continue to rise, until their confidence evaporates and prices collapse. Although the mass-psychosis asset bubble seems a fanciful notion to the rational economist, Vernon L. Smith and his collaborators have documented such bubbles in experimental markets, especially those with a high proportion of inexperienced traders (Econometrica [Sept. 1988]).

One problem with trying to identify irrational speculation is that the phenomenon is not readily defined, much less detected. Payne's definition appears to follow Eugene White's in that speculation is characterized by a divergence between an asset's price and its fundamental value (Journal of Economic Perspectives [1990]). And like White, Payne argues that the stock market at least was driven by fundamentals until about 1928. Thereafter, share prices diverged from that predicted by anticipated dividend yields.

What factors unmoored the era's asset markets from their fundamentals? Payne's answer focuses on the Federal Reserve's easy monetary policy, an incipient consumerist culture, new attitudes toward middle-class saving and investment, and the emergence of a “new” economy. If this sounds familiar in terms of the recent past, it should. There are, as Barry Eichengreen makes clear, parallels to be drawn, but with due caution (Eichengreen, Hall of Mirrors: The Great Depression, the Great Recession, and the Uses—and Misuses—of History [2015]). In contrast to the so-called Greenspan put of the 1990s, the Federal Reserve of the 1920s was committed to easing Britain's return to the gold standard and kept interest rates low so as not to compete with the Bank of England for gold reserves. Low interest rates inflated asset prices and encouraged speculation. General Motors's planned obsolescence by way of annual model changes encouraged consumers to trade the old for the new despite only modest practical improvements. Liberty bond drives during World War I eased the middle-class transition into investing in securities. It was a short hop from low-risk government bonds into riskier equities. And the radio (literally) broadcast the arrival of a new economy. Herbert Hoover captured the consensus in 1928 when he contended that America had nearly triumphed over poverty and “the business cycle of old” was dead (p. 46). History, of course, proved him profoundly wrong and completely unprepared to pick up the pieces. Hoover's dithering opened the door to the progressives and New Deal reformers, whose financial reforms were sufficiently undone in the 1980s as to invite a replay in the 2000s.

In the closing pages of his brief history of the 1920s and 1930s, Payne wonders why “government officials did not step in to stop what was obviously going to be a trainwreck” (p. 117). He offers two answers: first, Washington was more in thrall of Wall Street than of Main Street; and second, “people go nuts when they think they can make a lot of easy money” and politicians were unwilling to risk reelection by doing the prudent but unpopular thing of getting in the people's way (p. 118).

It is easy to nitpick any brief narrative of the events leading up to the crash and the Great Depression because some things of importance are glossed over while features of lesser importance are highlighted. One purpose of this book is to convey the spirit of the times, which took corporal form in the likes of Charles Ponzi, Billy Durant, George Merrick, Ferdinand Pecora, and Joseph Kennedy, among others. In this, the book is a success and will be a useful source for undergraduates interested in America in the early twentieth century.