Source: Balke and Gordon .
As we can see, it was not investment in equipment but investment into residential structures and the consumption of durable goods that underwent the largest absolute declines. It has to be noted that although GDP accounting treats spending on residential structures as investment, in fact, residential structures are not capital but highly durable consumption goods.
The decline in the consumption of durable goods in the narrow sense in Table [ ] seems to have almost entirely consisted in the decline in the purchases of automobiles. The number of automobiles produced in the fourth quarter of 1929 was lower than that in the third quarter by around half a million. As mentioned above, the average automobile price in 1929 was around $650. This should have reduced spending on durable consumer goods by $325 mln. In fact, this spending category fell only by $180 mln. which suggests that the decline in spending on passanger cars was partially but not completely compensated for.
The fact that the bulk of the GDP contraction can be attributed to these two types of consumption spending and that they were likely the result of satiation of the relevant markets suggests that the GDP decline attributable to these types of spending was caused by the absence of production of alternative consumer goods that could have filled the void. This realization creates a potential plausible connection of the GDP decline attributable to consumption declines and the potential malinvestments into industrial electrification.
It is quite plausible that such malinvestment diverted resources and from enabling production of other consumer goods that could have replaced the not-consumed automobiles and residential space.
This hypothesis is plausible since satiation of particular consumer good markets normally does not tend to cause GDP declines. We can illustrate this on the example of the automobile industry. Fig. [ ] below shows the evolution of new passanger car registrations in the US between 1925 and 1966 (with the exception of the WW2 period).