The subnormal recovery to 1935, the subnormal prosperity to 1937 and the slump after that are easily accounted for by the difficulties incident to a new fiscal policy, the new labor legislation and a general change in the attitude of government to private enterprise all of which can, in a sense to be defined later, be distinguished from the working of the productive apparatus as such.This idea that government policies can effect people's view of the economy and in particular investor's confidence in the longevity of private property rights and thus the return they may get from any investment has come to be known, thanks to Robert Higgs, as regime uncertainty. Higgs's argument being that that FDR’s policies at the time of the Great Depression, prevented a robust recovery of long-term private investment by significantly reducing investors’ confidence in the durability of private property rights. This lack of investment prolonged and deepened the depression in the US.
Since misunderstandings at this point would be especially undesirable, I wish to emphasize that the last sentence does not in itself imply either an adverse criticism of the New Deal policies or the proposition — which I do believe to be true but which I do not need right now — that policies of that type are in the long run incompatible with the effective working of the system of private enterprise. All I mean to imply is that so extensive and rapid a change in the social scene naturally affects productive performance for a time, and so much the most ardent New Dealer must and also can admit. I for one do not see how it would otherwise be possible for the fact that this country which had the best chance of recovering quickly was precisely the one to experience the most unsatisfactory recovery. (p. 64-5).
But there is nothing new under the sun. Schumpeter was ahead of even Higgs.
(HT: Organizations and Markets)