Monday, May 07, 2012 – by Staff Report
Murray Rothbard
Why Economies Boom ... One of the major schools of thought in macroeconomics rarely makes it into mainstream discussions: Real Business Cycle Theory. RBC, as it is known, claims that a lot of year-to-year economic volatility is caused by changes to the supply side of the economy: perhaps tax and regulatory changes, bad weather in farm economies, spikes in oil prices, and above all, the mysterious force known as the "technology shock." Finn Kydland and Ed Prescott shared a Nobel, partly for creating RBC theory ... [But] people don't switch from consuming to investing in a boom, they do more of everything. So you can see where I'm going: A change in the weather really is a technology shock. But can this possibly be relevant for explaining the boom-bust cycle in real-world economies? Not always, for sure, but I'm no monocauser: Monetary policy seems to matter a lot, as Friedman/Schwartz and Romer/Romer argued; and other business cycle stories abound. – Megan McArdle/TheAtlantic
Dominant Social Theme: The business cycle is a mysterious thing.
Free-Market Analysis: Megan McArdle is out with an interesting rumination about the business cycle. It's not merely a theoretical examination, however.
Who is she? From The Atlantic: "Megan McArdle is a senior editor for The Atlantic who writes about business and economics. She has worked at three start-ups, a consulting firm, an investment bank, a disaster recovery firm at Ground Zero, and The Economist."
The Atlantic is a truly elite thought magazine so in the end the article turns out to be a kind of defense of RBC and of the changes brought by ... wait for it ... global warming.
Read More
No comments:
Post a Comment