I have been unable to match this USAAF biplane with a similar photo mainly due to the cockpit canopy. I've found no other like it. I believe the photo was taken at Madison, WI or Chicago, IL in the 1930s. Written on the photo was "Douglas Military Observation Plane." I am hoping to find out the make, model, version, and if possible the Military Unit.
That is a Douglas O-38E, with sliding cockpit windows and rounded tail.
The tail on the right of the picture is also a Douglas O-38, but another version (standard, B,C & F had such tails)
Source: wikimedia Photographer: USAF
It seems that the picture in the question is damaged; there are some stains covering the area below the horizontal tailplane and also the arms crest on the fuselage. It seems that the arms crest is a circle with a cross in it. This is the insignia of the 33rd division, Illinois National Guard.
Some of their other O-38's are pictured here
A picture of possibly the same aircraft with the insignia clearly visible can be found on alamy.com