study); hence the same logic plausibly applies.There are hints that what was true of railroads in the 1930s was also true, broadly speaking, of the manufacturing sector. As factories were idled, firms had more opportunity to adapt factory layout and raw-material flow to the availability of the small electric motors that became available in the 1920s. More firms adopted the modern personnel management practices pioneered by a handful of large enterprises in preceding years.32 More firms set up in-house research laboratories to develop new methods and products; in a period when overall employment was stagnant, total R&D employment in US manufacturing rose from 6,274 in 1927 to 10,918 in 1933 and 27,777 in 1940, despite double digit unemployment (Mowrey, 1982). With less pressure to push product out the door, more time and effort could be devoted to commercializing new technologies like neoprene and nylon. Firms could experiment with new materials like plastics and alloy steels. They could experiment with instrumentation capable of saving both capital and labor. They could invest in new chemical processes for extracting minerals and processing agricultural materials.33These examples of technologically progressive firms in the 1930s are disproportionately large Chandlerian firms in a position to pioneer the commercialization of complex technologies, able to build in-house research labs and personnel departments, and in a position to reorganize large existing factories to take advantage of electric motors. These were not the kind of small firms and start-ups most heavily impacted by the limited availability of bank credit (see above). The question for our time, of course, is whether small or large firms will be the locus of innovation and productivity growth going forward.Top of pagePOLICY AND POLITICSCrises can also catalyze efficiency enhancing public-policy initiatives. It can be argued that the economic and financial crisis of the early 1930s catalyzed a whole host of economic policy changes that limited instability and set the stage for faster and more successful growth. Those of us who live in the San Francisco Bay Area and rely on the San Francisco-Oakland and Golden Gate Bridges cannot help but recall that the federal government contributed to the build-out of the road network and otherwise financed growth-friendly infrastructure investments in the depressed conditions of the 1930s. Government dealt with threats of financial instability through the adoption of deposit insurance and other bank regulatory measures. The Federal Reserve Act of 1935 centralized monetary policy decision making at the Board, preventing disagreements between regional reserve banks from again immobilizing central bank policy. Social welfare policies from unemployment insurance to social security were put in place, ensuring a fair sharing of the burden of adjustment and providing the social foundations for the post-World War II golden age of economic growth.34The recent literature suggests that certain kinds of economies are most likely to respond in efficiency enhancing ways to economic and financial crises.35 These are economies with cohesive, stable, centrist political systems that are able to equitably share out the costs of adjustment, compensate the losers, and facilitate rather than resist adjustment. The United States, which adopted not just unemployment insurance and